[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


               KEEPING OUR PROMISE TO AMERICA'S SENIORS:
                RETIREMENT SECURITY IN THE 21ST CENTURY

=======================================================================

                                HEARING

                               BEFORE THE

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION
                               __________

             HEARING HELD IN WASHINGTON, D.C., MAY 15, 2019
                               __________

                            Serial No. 116-8
                               __________

           Printed for the use of the Committee on the Budget
           
                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]           
           
                       Available on the Internet:
                            www.govinfo.gov
                            
                              ___________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
37-505                     WASHINGTON : 2019                                                     



                        COMMITTEE ON THE BUDGET

                  JOHN A. YARMUTH, Kentucky, Chairman
SETH MOULTON, Massachusetts,         STEVE WOMACK, Arkansas,
  Vice Chairman                        Ranking Member
HAKEEM S. JEFFRIES, New York         ROB WOODALL, Georgia
BRIAN HIGGINS, New York              BILL JOHNSON, Ohio,
BRENDAN F. BOYLE, Pennsylvania         Vice Ranking Member
RO KHANNA, California                JASON SMITH, Missouri
ROSA L. DELAURO, Connecticut         BILL FLORES, Texas
LLOYD DOGGETT, Texas                 GEORGE HOLDING, North Carolina
DAVID E. PRICE, North Carolina       CHRIS STEWART, Utah
JANICE D. SCHAKOWSKY, Illinois       RALPH NORMAN, South Carolina
DANIEL T. KILDEE, Michigan           CHIP ROY, Texas
JIMMY PANETTA, California            DANIEL MEUSER, Pennsylvania
JOSEPH D. MORELLE, New York          WILLIAM R. TIMMONS IV, South 
STEVEN HORSFORD, Nevada                  Carolina
ROBERT C. ``BOBBY'' SCOTT, Virginia  DAN CRENSHAW, Texas
SHEILA JACKSON LEE, Texas            KEVIN HERN, Oklahoma
BARBARA LEE, California              TIM BURCHETT, Tennessee
PRAMILA JAYAPAL, Washington
ILHAN OMAR, Minnesota
ALBIO SIRES, New Jersey
SCOTT H. PETERS, California
JIM COOPER, Tennessee

                           Professional Staff

                      Ellen Balis, Staff Director
                  Dan Keniry, Minority Staff Director


                                CONTENTS

                                                                   Page
Hearing held in Washington D.C., May 15, 2019....................     1

    Hon. John A. Yarmuth, Chairman, Committee on the Budget......     1
        Prepared statement of....................................     4
    Hon. Steve Womack, Ranking Member, Committee on the Budget...     6
        Prepared statement of....................................     8
    Hon. John B. Larson, Member, a Representative in Congress 
      from the State of Connecticut..............................    11
        Prepared statement of....................................    18
        letter submitted for the record..........................    21
    Melissa M. Favreault, Ph.D., Senior Fellow, Urban Institute..    46
        Prepared statement of....................................    49
    Anne Marie Cook, President and CEO, Lifespan of Greater 
      Rochester..................................................    78
        Prepared statement of....................................    80
    James Dale Hanner, Secretary-Treasurer, North Carolina 
      Committee to Protect Pensions..............................    88
        Prepared statement of....................................    90
    Andrew G. Biggs, Ph.D., Resident Scholar, American Enterprise 
      Institute..................................................    93
        Prepared statement of....................................    95
    Hon. Janice D. Schakowsky, Member, Committee on the Budget, 
      article submitted for the record...........................   106
    Hon. Pramila Jayapal, Member, Committee on the Budget, report 
      submitted for the record...................................   135
    Hon. Sheila Jackson Lee, Member, Committee on the Budget, 
      statement submitted for the record.........................   231
    Hon. Chip Roy, Member, Committee on the Budget, questions 
      submitted for the record...................................   237
    Answers to questions submitted for the record................   239

 
                         KEEPING OUR PROMISE TO
		     AMERICA'S SENIORS: RETIREMENT
                     SECURITY IN THE 21ST CENTURY

                              ----------                              


                        WEDNESDAY, MAY 15, 2019

                          House of Representatives,
                                   Committee on the Budget,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:05 a.m., in 
Room 210, Cannon House Office Building, Hon. John A. Yarmuth 
[Chairman of the Committee] presiding.
    Present: Representatives Yarmuth, Moulton, Schakowsky, 
Morelle, Scott, Peters, Horsford, Omar, Jackson Lee, Jayapal; 
Womack, Flores, Stewart, Meuser, Hern, Timmons, Burchett, 
Johnson, Crenshaw, and Woodall.
    Chairman Yarmuth. The hearing will come to order. Before we 
begin I know many of us in the Budget Community are mourning 
the loss of Alice Rivlin, the founding director of the 
Congressional Budget Office, whose groundbreaking career also 
included stints as the director of OMB and Vice Chair of the 
Federal Reserve Board, among many other roles. Alice was widely 
respected and revered by Democrats and Republicans alike for 
her work and vision, her warmth and compassion, and her 
contributions will continue to help frame our debates for years 
to come. I think I speak for everyone in this room when I say 
that Alice Rivlin will be deeply missed, and that we send our 
condolences to her family and loved ones.
    But now good morning, and welcome to the Budget Committee's 
hearing on Keeping our Promise to America's Seniors: Retirement 
Security in the 21st Century. Today's hearing will include two 
panels. I would like to thank our great panelists for being 
here with us today.
    On our first panel, we will be hearing brief remarks from 
our friend, the gentleman from Connecticut, Mr. Larson, 
Chairman of the Social Security Subcommittee for House Ways and 
Means, and for our second panel we will be hearing from Dr. 
Melissa Favreault, senior fellow at the Urban Institute; Mr. 
James Dale Hanner, secretary treasurer of the North Carolina 
Committee to Protect Pensions; Dr. Andrew Biggs, resident 
scholar at the American Enterprise Institute. And I would like 
to ask Mr. Morelle to note our final panelist, who I understand 
is joining us today from Mr. Morelle's district.
    Mr. Morelle, I yield to you.
    Mr. Morelle. Yes. Thank you, Mr. Chairman. I am so pleased 
to welcome to this esteemed Committee my dear friend, Anne 
Marie Cook. Anne Marie serves as the president and CEO of 
Lifespan of Greater Rochester, a local not-for-profit that 
provides critical support services for the aging population in 
my district and across New York State. For over two decades she 
has helped older residents and their caregivers to navigate 
long-term care options, help with health insurance options 
under Medicare, assist in elder abuse situations, and so much 
more.
    I am truly grateful for her friendship, for her 
partnership, and her dedication to ensuring a high quality of 
life for those in their later years. Our Committee will, no 
doubt, benefit greatly from her knowledge and expertise in 
today's testimony.
    And I want to thank you for giving me the opportunity to 
introduce Anne Marie to the Committee.
    Chairman Yarmuth. Thank you, Mr. Morelle.
    Once again I would like to welcome Chairman Larson and our 
witnesses. Thank you all for joining us. And now I yield myself 
five minutes for an opening statement.
    As we know, keeping our promise of secure retirement to 
American workers while maintaining our nation's fiscal health 
is one of our greatest policy challenges. Social Security is 
facing a shortfall. Traditional employer-sponsored pensions are 
disappearing. And due to stagnant wages and income inequality, 
far too many Americans cannot afford to save for retirement. 
Americans are also living longer. Our birth rate is declining, 
and our population is skewing older.
    This perfect storm of changing demographics and its 
inescapable mathematical reality threaten to upend the promise 
of a secure retirement for millions of Americans. And the 
problem grows more pressing by the day. By 2035, Americans aged 
65 years and older will outnumber children under the age of 18 
for the first time in history. More than 63 million Americans 
are already receiving Social Security benefits and every day an 
additional 10,000 baby boomers reach eligibility.
    As a result, this bulwark program is facing serious long-
term funding shortfalls, with promised benefits facing cuts as 
high as 20 percent as soon as 2035 if Congress does not act. 
Cuts of this level would be devastating for the individuals who 
rely on Social Security. Since its inception in 1935, the 
program has been a pillar of retirement security. But it was 
never meant to be seniors' primary source of income. However, 
today, half of seniors receive at least half of their income 
from Social Security, and one-fifth receive 90 percent or more 
of their income from the program.
    But it is not just those who rely on Social Security who 
are in jeopardy. In today's unreliable retirement landscape, 
even those hard-working Americans who have a pension are now at 
risk of losing their hard-earned benefits. In my home state of 
Kentucky, pensions for teachers and other state employees are 
under attack by our governor, who believes the people who 
educate our children are ``selfish'' for wanting the retirement 
they earned. Multi-employer pension programs throughout the 
country are unable to pay out at their promised rates. I have 
met with truck drivers from my district whose pensions will be 
cut by 60 percent or more if Congress doesn't step in.
    These are all American workers who planned for their 
retirement and contributed to their pensions instead of taking 
home more pay. Now, after working for decades, their planned 
retirements may vanish.
    However, the causes of this problem go even deeper than 
changing demographics and retirement programs. According to 
Federal Reserve economists, on average, the bottom 90 percent 
of American households have been unable to recover the wealth 
they lost during the Great Recession. Wage gaps and systemic 
income inequality are unfairly capping lifetime earnings and 
savings opportunities for millions of American workers, 
particularly women and minorities. White retirees are almost 
twice as likely as black and Latino retirees to have private 
retirement savings, and are significantly more likely to have 
savings through an IRA or a 401(k) retirement account. Longer 
life expectancies and gender pay disparities make women more 
economically vulnerable than men, with women aged 65 and over 
being 80 percent more likely to be impoverished than their male 
counterparts.
    Meeting this fiscal challenge will require a clear-eyed 
acceptance of the demographic realities and a willingness to 
responsibly raise more revenue over time. Immigration reform 
could make significant inroads in alleviating some of our 
demographic challenges. It is also likely the only realistic 
solution for addressing lower birth rates, which slow the 
growth of our labor force and economy and put even greater 
pressure on federal budgets.
    I hope to discuss immigration today, but we will definitely 
review it in detail at an upcoming hearing on the issue.
    It is also important to note that the Trump tax cuts 
enacted last year have made this situation more complicated. 
These tax cuts blew a massive $1.9 trillion hole in our 
deficits. As a result, our Republican colleagues have called 
for extreme cuts to insurance programs, including Social 
Security and Medicare. These proposed cuts and the entire Trump 
budget were dead on arrival to Congress, thankfully, but they 
highlight how far apart Democrats and Republicans are when it 
comes to protecting Social Security and earned benefits.
    Congress has a responsibility to act and honor the promise 
of retirement security. We have a long way to go before we can 
enact the smart and multifaceted approaches that can close the 
retirement gap without sacrificing our nation's fiscal health, 
or harming current or future retirees. It is my hope that this 
hearing will help advance that process.
    Once again I thank our witnesses for helping us with the 
discussion, and I look forward to their testimony.
    [The prepared statement of Chairman Yarmuth follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. I now yield five minutes to the Ranking 
Member, Mr. Womack.
    Mr. Womack. I thank the Chairman and appreciate the 
opportunity to be here today, and to hear from our witnesses.
    Strengthening retirement security for today's seniors and 
families, as well as future generations, is a goal that I think 
we all share. The question is on how we get there, especially 
at a time, as the Chairman so appropriately stated, that we 
have got 10,000 people a day aging into these programs. And 
they are all living a lot longer, which, I think, is a good 
thing.
    But let's start with Social Security. Not only is it one of 
the biggest parts of our federal budget, making up 24 percent 
of all federal spending, it is also a primary source of 
retirement income for millions of Americans. We have all seen 
the data, we have read the headlines. The program is in 
trouble.
    As more Americans become eligible for Social Security 
benefits, and as Americans live longer, fewer Americans are 
entering the workforce and paying into the program. Over time 
that means the money Social Security spends on benefits will 
outpace the revenue it brings in through the collection of 
payroll taxes. At its current rate the program will only be 
able to pay three quarters of the benefits retirees were 
promised by the year 2035.
    I agree with my friends across the aisle that is certainly 
unacceptable. It's our responsibility in Congress to prevent 
these across-the-board benefit cuts, and make sure this 
important program can continue and work better for workers and 
retirees today and for generations to come.
    As America's demographics have evolved, lawmakers on both 
sides of the aisle have worked together on four separate 
occasions to pass structural reforms to improve the program. 
Most recently, in 1983, Congress passed legislation to 
gradually increase the retirement age from 65 to 67. That was a 
common-sense bipartisan idea to address the fact that Americans 
are living roughly 15 years longer today than they were when 
Social Security was first created in 1935. I am committed to 
working together to uphold a history of bipartisan Social 
Security reform.
    One thing is certain: punishing today's workers and job 
creators with enormous tax hikes is not a solution. That 
approach would drag down our economy and penalize Americans for 
working hard, hurting Millennials and small business employees 
the most. When it comes to Social Security we should focus on 
rewarding work while targeting the benefits to help vulnerable 
Americans. We can also strengthen retirement security for all 
Americans by continuing to promote policies that fuel our 
economy.
    While the Chairman took a stab at the Tax Cuts and Jobs 
Act, I think it is safe to say that we would disagree, that I 
do believe that the Tax Cuts and Jobs Act have inspired a lot 
of people to enter the workforce, and that can't be a problem 
for the collection of the payroll taxes that strengthen Social 
Security.
    With more jobs, record low unemployment, record high wage 
gains, and a growing economy, workers and families are able to 
save and invest more for their future. That has not only led to 
record high contributions, it has also led to increased 
optimism. A recent CNBC poll found that a majority of Americans 
are feeling more confident about saving for retirement today 
than they felt three years ago. And in a survey conducted by 
the Federal Reserve, 75 percent of retirees believe they have 
enough retirement income to maintain their standard of living.
    We should focus on solutions that build on this progress 
and help even more Americans save. For example, the Setting 
Every Community Up For Retirement Enhancement Act of 2019, 
known as SECURE, introduced by bipartisan leaders on the Ways 
and Means Committee, would strengthen retirement security by 
encouraging job creators of all sizes to offer full and part-
time employees more retirement options.
    I look forward to exploring more bipartisan solutions like 
this today.
    Mr. Womack. And with that I thank you again for holding 
this hearing, Mr. Chairman, and I yield back my time.
    [The prepared statement of Steve Womack follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. I thank the Ranking Member. And as you--
as we usually do, if any other members have opening statements, 
you may submit those statements in writing for the record.
    Welcome, Chairman Larson. The Committee has received your 
written statement, and it will be made part of the formal 
hearing record. You will have five minutes to deliver your oral 
remarks. You may begin when you are ready----
      
      

STATEMENT OF HON. JOHN B. LARSON, A REPRESENTATIVE IN CONGRESS 
                 FROM THE STATE OF CONNECTICUT

    Mr. Larson. Well, thank you, Mr. Chairman. I want to thank 
Chairman Yarmuth and Ranking Member Womack for the opportunity 
to come before the distinguished Budget Committee.
    As you indicated, we have written testimony. And what I 
would like to do is deviate from that because of--you know, in 
your both of your opening remarks you covered a lot of the 
ground that I would go over.
    I would add, in fact, that while--and you are right to say 
that this is--keeping our promise to American seniors is first 
and foremost, the Ways and Means Committee has already 
unanimously adopted the SECURE Act that Mr. Womack alluded to, 
and legislation also that would require automatic enrollment 
for employees.
    Bipartisanly, Rich Neal is heading up leading legislation 
addressing multiemployer pension crisis that we face with a 
number of pieces of legislation.
    I would also add that we want to go through these things 
and address them in a bipartisan fashion. And we think we have 
legislation that is increasingly--because we haven't had 
hearings in eight years, we think that legislation here is 
drawing critical masses of the required individuals.
    This is our responsibility at the end of the day. The last 
time that Congress truly looked at this program was 36 years 
ago. And when they did it, they did it bipartisanly with, at 
the time, a reluctant Republican president, but one who became 
a chief advocate. And Tip O'Neill and Ronald Reagan get a lot 
of credit for bringing people together. But I would point out 
also that the Republicans controlled the Senate at that time 
also, and Howard Baker was the United States Senator.
    What's at stake here? What's at stake here is the nation's 
leading insurance program and the nation's leading anti-poverty 
program. Without this program and the direction that we are 
headed in, by 2035 we would find ourselves in a situation where 
people who have earned $50,000 in income throughout their lives 
would face a 20 percent across-the-board cut, and would be 
living below the poverty level. It's our responsibility. We're 
the actuaries.
    It's an insurance program. The public knows this, because 
it says they look at their pay stub and it says FICA. What does 
that mean? Federal Insurance Contribution Act. Whose 
contribution? Theirs. And approximately every one of us has 
approximately 100,000 more in districts, depending on how it 
is, people who are currently on Social Security.
    It is our responsibility to make sure that the program is 
actuarially sound. I don't know how any member can go back to 
their district, look people in the eyes, including your 
mothers, your sisters, your aunts, your uncles, and say, ``With 
our responsibility, when--on our watch, knowing everything that 
we do, and knowing as both the Chairman and Ranking Member have 
outlined, what our responsibility is that we chose not to 
act.''
    This has also become the civil rights issue of the day. It 
has also become a woman's issue of the day, and an economic 
development issue of the day. I talk about that in my 
testimony, but I just want to briefly underscore how we see the 
disadvantages that take place for women of color, for black men 
who have--find themselves with mortality rates and the 
inability to collect on monies that they have put forward into 
this program, and why across-the-board cuts, or hikes by 
raising the age of individuals that just turned 66--it is 
hiked, it will go up to 67. Another hike beyond that for every 
year that we add is a 7 percent cut. And with so many 
individuals depending upon Social Security, it's paramount that 
this Congress, faced with our responsibility, takes the action 
that it needs.
    We have legislation that is out there. We have introduced 
it with more than 200 cosponsors. What we need is now the 
bipartisan support. It will pass the House of Representatives, 
there is no question about that.
    And I want to commend the President of the United States 
for first taking a bold stand in a presidential debate when it 
really mattered, and saying this isn't an entitlement, this is 
an earned benefit. Now it is time for us to all come together 
and work collaboratively, so that we save this program and 
enhance it the way it should be.
    I am happy to take your questions.
    [The prepared statement of John B. Larson follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. I don't--any member want to ask Chairman 
Larson a question?
    Great. We thank the Chairman for his testimony and his 
insights, and we appreciate your being here today.
    Mr. Larson. Thank you, Mr. Chairman.
    Chairman Yarmuth. Thank you very much.
    Mr. Larson. You didn't even give me a chance to go into my 
Starbucks.
    [Laughter.]
    Mr. Larson. These are my stump speech props that I have. 
But I would point out--and like to submit for the record--the 
Chief Actuary of Social Security--we have the only bill that 
has been deemed by the actuary to be sufficiently solvent. That 
meets the requirement by law that is our responsibility to 
sustain the program beyond 75 years.
    [The information follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. Ranking Member has a question.
    Mr. Hern. Mr. Chairman, just a point of clarity. You ask if 
anybody wanted to ask any questions. Well, in addition to our 
five minutes you are going to give us later?
    Chairman Yarmuth. Just one question.
    Mr. Hern. Well, the one question is that--just for a point 
of clarity for the record--the 21 percent that we are going to 
see in 2035 affects all people, not just----
    Mr. Larson. Exactly.
    Mr. Hern. You had mentioned it was a civil rights issue and 
a woman's issue, but it is all people's issues.
    Mr. Larson. It is all people's issues, the 20 percent 
across the board. But currently, under current law, you have 5 
million Americans, there are 62 million Americans who are on 
Social Security currently, 5 million of whom are living below 
the poverty level.
    Part of what we hope to do is to make sure that we both 
create a new floor for Social Security, so that especially 
women who, because they are the primary caregivers, and today 
with 74 percent of them in the workforce find themselves--
because they were earning $.80 for every dollar their male 
counterparts were, and because they spent less time because 
they were the caregivers, find themselves in poverty. In fact, 
close to 3 million women across this country who have paid in 
all their quarters, worked all their lives, are living in 
poverty in the wealthiest nation in the world.
    And this is an actuarial problem that is easily resolved by 
Congress. I ask any member of this body, have any of your 
insurance premiums gone up since 1983? You have the 
responsibility--if you were a business, if you were an 
insurance company--I happen to be from an insurance capital of 
the nation, and had an insurance business, as well. You know, 
you would make those adjustments and raise those costs. Had 
they indexed it the way they should have in 1983, we wouldn't 
even be having this conversation.
    And Social Security has never missed a payment.
    But thank you for that question. It is a great point 
because this will impact all individuals. But when you look 
currently how this disproportionately impacts women and men of 
color because of their particular financial situation, it is 
time for us to act.
    Mr. Hern. Thank you for the clarity.
    Chairman Yarmuth. The gentleman from California, Mr. 
Peters, has a question.
    Oh, did you have one?
    Mr. Peters. I think you are fishing for me to ask you about 
your Starbucks reference, Mr. Chairman. So I was going to give 
you the chance to do that.
    Mr. Larson. Well, everybody always asks, ``Well, how you 
going to pay for this?'' Well, we pay for it by making sure 
that we do what they should have done in 1983. We create--we 
have incremental funding. We increase it approximately by 1.2 
percent, the contribution. And, as you know, the contribution 
is made by the employee and the employer.
    The employer gets to write it off his taxes. The employee 
not only gets a pension benefit, but also--and we don't discuss 
this enough--a disability payment, spousal and dependent 
coverage. There is no place in the public market, as a former 
insurance agent, that you can go and buy this. It's the full 
faith and credit of the United States government.
    We also lift the cap on people over $400,000, and that is 
where the Starbucks comes in. At every senior's center I go to 
I say, ``How much does this Starbucks cost?''
    And they all will say, ``Is it a latte?''
    And I go, ``Yes.''
    They go, ``Four dollars and fifty cents.''
    I go, ``That's correct. Or, under our plan, if you are 
making $50,000 a year this is nine weeks of Social Security 
payments. And even if you are that poor person at $400,000, it 
will cost you more to buy a latte than it will to fix Social 
Security.''
    We can do this. Had they incrementally phased this in and 
indexed it back in 1983, we wouldn't be having this discussion. 
They didn't. We're the stewards of this program. It's our 
responsibility to do this, and we can fix a major problem.
    Again, I credit the President for sticking his neck out on 
this one, as well.
    Chairman Yarmuth. The Ranking Member has a question.
    Mr. Womack. You know, one of the great frustrations I have 
as a Member of Congress is the fact that the varsity sport of 
Congress is a game called kicking the can down the road.
    Mr. Larson. Exactly.
    Mr. Womack. And we're really good at it. I mean we don't 
have a rival in this notion that, when confronted with a 
problem like we have with Social Security--or even more urgent, 
in my view, is the problem with the Hospital Insurance Trust 
Fund, which is about 10 years ahead of Social Security, in 
terms of insolvency--that it seems as though we do not decide 
to take effective action until we're on the cliff. And need I 
remind anybody of the cliffhanger that we had in 2012 and 2013 
on the Bush-era tax cuts that we waited until the very last 
minute--in fact, beyond the last minute?
    But I digress. I think the people of America, while there 
is anecdotal evidence out there that they understand that we 
have a problem, but the problem is not tomorrow. The problem is 
2035. And it seems as though Congress is okay with deciding we 
are going to deal with this when it becomes a real matter of 
urgency, like 2033 or 2034. And it seems to me that whenever 
you delay the eventual that long, that your options become 
fewer and further between, and they become much more draconian 
in their nature.
    So I don't know if I have got so much of a question, as 
just a comment along those themes that I will throw back at 
you, Congressman Larson, for any response you would care to 
make.
    Mr. Larson. Well, I couldn't agree more with you. And also, 
I would point out--and I do so in my testimony--how it's also 
said, well, you know, this problem, you know, is--you know, we 
are going to be okay until 2035, and also that, well, this is 
just a shifting from one generation to another. No, it is not.
    In fact, Millennials are going to need Social Security more 
than Baby Boomers will need Social Security. It's long overdue 
for Boomers and Millennials to unite and talk about something 
that's within our grasp, and something that we can solve, and 
do so pragmatically, in a common-sense manner, and address it 
in a business-like manner, the same way any actuarial would do 
that.
    Now, the unique feature here is that every single thing 
that we call for in these enhancements has been--the 
independent actuary said not only is it paid for, but it is 
sustainable beyond 75 years. Wouldn't it be great on our watch 
to take this off Congress's plate and to go home and be able to 
look everyone in the eye and say, ``Not only did we fix this, 
we fixed it for--by law, as we were required, beyond 75 years, 
and we enhanced it. We won't allow for anyone who has paid 
their quarters in to retire into poverty. We won't see women of 
color have the--you know, to find themselves impoverished, even 
though they've worked all their lives and paid in their 
quarters?''
    And so it just seems to me that there is ample 
opportunity--and again, it took President Reagan and Tip 
O'Neill coming together. And most people forget that Howard 
Baker was the Senate Chairman at that time. So it is the 
identical situation that we are confronted with here today. Tip 
had a few more Democrats at that time than we do today, but I 
think the situation warrants--especially with the with the 
President being predisposed to do this, and have talked and 
written in his book about this as being an earned benefit. 
Thank you.
    Chairman Yarmuth. Thank you. The gentleman from Texas, Mr. 
Flores, has a question.
    Mr. Flores. Thank you, Chairman Yarmuth and Republican 
Leader Womack, for holding today's hearing.
    Chairman Larson, I appreciate you being here. Mr. Womack 
talked about the blood sport of kicking--or the sport of 
kicking the can down the road that Congress has gotten pretty 
good at. The other thing that we have gotten really good at is 
the blood sport of condemning each other when either side tries 
to touch the third rail----
    Mr. Larson. Right.
    Mr. Flores.--of policy in this town. And Social Security is 
certainly one of those.
    And I remember back in 2011, when I was a freshman member 
of the Budget Committee, we put up a plan to try to save 
Medicare for all generations. And within 36 hours there was an 
ad of somebody pushed a wheelchair that threw granny over the 
cliff, and that somebody was--that looked like--a lot like Paul 
Ryan, who was then the Budget Chair. So I agree with you that 
we are going to have to hold hands and do this in a bipartisan 
manner.
    There are some things about your bill I like. There are 
some things about your bill that I think would--could benefit 
from some bipartisan support. And so I hope that that is 
something that we can do, moving forward.
    You know, as we are all aware, the 2019 Social Security 
Trustee's report offered a grim outlook on the current path. 
Social Security will run deficits of nearly $1.8 trillion over 
the next 10 years, and benefits will face 20 percent reductions 
by 2035. That means today's 51-year-olds will face cuts when 
they reach retirement age. And today's newest retirees will 
face cuts when they turn 78. So it is important to note that 
the average new retiree lives to 85, age 85. And so, if we 
don't do anything, as you were pretty eloquent in saying, 
Social Security is going to become insolvent, and everyday 
Americans are going to hurt.
    So again, I--we have got to grab hands and work on this, 
but it has got to be bipartisan. So I am hopeful that you are 
willing to do that.
    I do have to add some additional context to some of the 
things that the Chairman said in his opening statements.
    One, wage growth is not flat or stagnant now. The last 
quarter's wage growth was up 3.2 percent. And there were some 
comments about income inequality. The bottom 10 percent, income 
in the bottom 10 percent of Americans the last quarter, grew by 
6.6 percent, over double of what the average population did. So 
the tax cuts, the economic reforms that we have proposed, are 
truly lifting all boats and reducing the age--the income 
inequality that exploded over the last several years before 
that.
    So with that I yield back the balance of my time. Thank 
you.
    Mr. Larson. Well, I would just add that--well, thank you 
for the comments.
    I would add also that Tom Reed has been outstanding. And I 
think--let's be blunt about it--I think what people don't like 
about the program is how we pay for it. And--but at the end of 
the day we are faced with two options: either you raise the 
age, which--again, let's be honest about it, that's a cut in 
benefits to people that we are finding--and both the Republican 
leader and the Chairman eloquently stated what the deal is 
here, in terms of these people and what they will receive.
    And you know, for them to be looking at--for many of them, 
for almost 90 percent of people who haven't recovered from the 
2008 recession then to find themselves in a situation where we 
are either going to hike the age where--they get another cut in 
the benefit that, for whatever the reason, their inability to 
save, their companies no longer--I mean there is no such thing 
anymore as defined benefit plans. We all know that. And we 
should be doing everything that we could to encourage all three 
legs of the stool.
    But our primary responsibility is Social Security. And for 
the Millennials, especially, it is not just the wage 
differential or wage stagnation, but it is also enormous 
student loan debt, the gig economy, and everything that that 
is, the lack of high paying labor jobs, the fact that they will 
be a generation that will probably earn less than their parents 
earned, and are going to rely more on Social Security.
    And even--and primarily again, because of the opioid 
epidemic, et cetera, actually, the tables--the death rate 
tables have dropped, and have come down. And so--but even as 
people are living longer, all the more reason that--
actuarially, where we are responsible that we make the program 
solvent, and that it is able to accomplish its goals.
    But Tom, Mark Meadows--I mean you would think that would be 
strange bedfellows, Mark Meadows and myself, but he talks about 
his mom and everything that she needed in order to make this 
program secure. Tom, Tom Price, who is--both who lost their 
dads, and were raised on Social Security. Rich Neal, the 
Chairman of the Committee, lost his mother and father. And so I 
think everybody understands the importance and significance.
    The issue is can we look in the mirror and say, ``Hey, 
listen, if we raise the age, and that is a 7 percent cut to 
somebody, how do they handle it?'' This is the reality of what 
they will receive. That is--would be my point.
    Chairman Yarmuth. All right. Once again, thank you, 
Chairman Larson. You can take your Starbucks cup and----
    [Laughter.]
    Chairman Yarmuth. I appreciate your testimony.
    Mr. Larson. Thank you, Mr. Chairman.
    Chairman Yarmuth. Once again, absolutely.
    Chairman Yarmuth. I would now like to ask our second panel 
to take their seats.
    [Pause]
    As I mentioned to Chairman Larson, your written statements 
will be made part of the formal hearing record. You will each 
have five minutes to deliver your oral remarks.
    I first introduce Dr. Favreault. Begin when you are ready.

STATEMENT OF MELISSA M. FAVREAULT, PH.D., SENIOR FELLOW, URBAN 
  INSTITUTE; ANNE MARIE COOK, PRESIDENT AND CEO, LIFESPAN OF 
  GREATER ROCHESTER; JAMES DALE HANNER, SECRETARY-TREASURER, 
  NORTH CAROLINA COMMITTEE TO PROTECT PENSIONS; AND ANDREW G. 
 BIGGS, PH.D., RESIDENT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE

            STATEMENT OF MELISSA M. FAVREAULT, PH.D.

    Dr. Favreault. Chairman Yarmuth, Ranking Member Womack, and 
Members of the Committee, my name is Melissa Favreault and I am 
a senior fellow at the Urban Institute. The views I express 
today are my own, and not those of the Urban Institute, its 
board, or its funders.
    Last month the Social Security and Medicare trustees 
released their annual reports repeating their warning that 
these programs have significant shortfalls. These need to be 
closed by either increased program revenues, reductions in the 
rate of growth of benefits, or some combination. They 
emphasized that earlier action will make it easier to spread 
the costs of change across more generations and to avoid sudden 
changes that could harm beneficiaries and workers.
    Given these programs' broad reach into our economy and 
society, we need sustained discussions about how to meet these 
challenges. My contribution to today's discussion emphasizes 
five points.
    First, our current social insurance programs work well 
providing powerful protection against risk for seniors and 
people with disabilities. They form the foundation of our 
social contract with America--with the working and middle-class 
Americans. Social Security benefit progressively reduces labor 
market risk, annuitization reduces the risk of long life and 
outliving one's assets, inflation protection reduces financial 
risk, disability and survivor's benefits reduce health and 
early mortality risk.
    The program has been enormously successful. Meyer and Wu 
recently estimated that Social Security reduces the overall 
poverty rate by about a third, and age in poverty by three 
quarters, and two-thirds of the benefits go to people who were 
poor prior to transfers.
    In seeking solutions to Social Security's long-run 
financing imbalance, we must bear in mind that economic 
inequality has eroded the program's wage base. Since the mid-
1970s, typical workers' wages have not kept up with 
productivity, but wages at the very top have grown rapidly. 
Critically for Social Security, the share of total earnings the 
program taxes has fallen from 90 percent to close to 83 
percent. Inequality thus contributes to Social Security's 
fiscal imbalance. Increasing the wage base should be part of 
the solution.
    Large disparities in longevity pose challenges with 
equitable distribution of Social Security Medicare benefits. By 
more than one estimate workers in the highest income quartile 
of the earnings distribution in their early fifties can expect 
to live more than 10 years longer than those in the lowest.
    Social Security's broad support stems from public 
perception that benefits are an earned right, with benefits 
linked to contribution. So long-range solutions must retain the 
society-wide investment by maintaining broad-based financing 
and strong income-related benefits.
    Second, these core social insurance programs have a few 
gaps. Too many seniors, and especially long-term caregivers, 
women--especially if they are unmarried--African-Americans, 
Latinos, less educated workers, and people with health problems 
and disabilities, and the oldest old have incomes that hover 
below or near poverty. Many are vulnerable to very large health 
care bills.
    In part to help account for the importance of health care 
costs, Census Bureau researchers compute supplemental poverty. 
According to this measure, roughly 14 percent of adults aged 65 
or older, or approximately 7 million people, are estimated to 
be poor.
    Some promising ideas for closing Social Security adequacy 
gaps include minimum benefits and caregiver credits. A full 
career of work at the minimum wage does not guarantee a 
poverty-level benefit from Social Security, and long caregiving 
spells are associated with higher risk of low benefits. So 
there is a strong case for bolstering benefits.
    To the extent to which we are concerned with health care 
affordability and health shocks, adjustments to Medicare cost 
sharing or Medicaid eligibility could help, as well.
    Third, the risk of needing long-term services and supports, 
estimated to be as high as 70 percent at age 65 plus in recent 
years, poses enormous challenges for retirees. A year of paid 
home care can cost $40,000. A year in a nursing home can be 
more than double that. Because these costs are unaffordable for 
so many, we rely heavily on unpaid family caregivers. Many 
jeopardize their own retirement security to help their family 
members.
    Fourth, since Social Security's inception it has been 
acknowledged that responsibility for retirement security does 
not fall solely on this program. Employers play a crucial role 
through offering retirement accounts. Behavioral economics can 
teach us how to better structure employee retirement accounts 
to boost participation in contributions. However, access issues 
remain. Nearly 30 percent of workers have no access on the job, 
and about 45 percent are not participating. In the lowest wage 
quartile more than half don't have access, and three quarters 
are not participating.
    Current federal subsidies for retirement savings and 
defined contribution plans overwhelmingly reach those in the 
top fifth of the income distribution. A better approach would 
be to promote saving among those who most need to save, and for 
whom saving is most difficult. Tax credits, for example, would 
work better than deductions at reaching lower savers and 
vulnerable workers.
    Finally, as we seek solutions to our fiscal challenges, we 
need to recognize that inequality in social and economic 
disparities today are deep. They often extend across multiple 
domains and, in some cases, may be growing. The same people who 
do not have good jobs and less access to retirement accounts 
are the same people who are more likely to become disabled. 
When we look at disparities in severe disability and dementia, 
for example, by education and race, the differences across 
groups are stunning.
    These disparities constrain our financing options. Revenue 
increases need to provide a very large share of the solution 
over long-run investments in education, and younger workers 
must also be part of the solution. Thank you for this 
opportunity to testify. I look forward to questions.
    [The prepared statement of Melissa M. Favreault follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. Thank you for your testimony.
    Mrs. Cook, you are now recognized for five minutes.

                  STATEMENT OF ANNE MARIE COOK

    Mrs. Cook. Thank you very much, Chairman Yarmuth, 
Congressman Womack, and Committee Members. I am Anne Marie 
Cook, president and CEO of Lifespan of Greater Rochester, a 
nonprofit in New York State, solely focused on providing 
information, guidance, and services to older adults. In 2018 we 
served 38,000 older adults and family caregivers. Financial 
Management is one of our core services. My remarks today will 
address the state of current and future Social Security 
beneficiaries.
    According to the National Institute on Retirement Security, 
a nonprofit, nonpartisan organization, three-fourths of 
Americans say the nation faces a retirement crisis. Seventy 
percent say the average worker cannot save enough to guarantee 
a secure retirement. And 79 percent say they don't know enough 
about investing to ensure savings last through retirement.
    There may be economists who tell you that America does not 
face a retirement crisis. We and many others disagree with that 
assessment because I see people in crisis every day. As 
president of Lifespan I can tell you that the one quarter of 
current beneficiaries who are relying on Social Security for 90 
percent of their income are not, in fact, living comfortably. 
Neither are the 43 percent in non-married beneficiaries who 
rely on Social Security for 90 percent of their income. And 
neither are the 33 percent of African-Americans who receive at 
least 90 percent of their income from Social Security.
    According to the Government Accountability Office Social 
Security provides most of the income for about half of the 
households 65 and older. And, despite Social Security, 4.6 
million Americans 65 and older, almost 10 percent, lived below 
the poverty line in 2016. That is just $11,800 a year.
    And using a newer supplemental poverty measure, 15 percent 
of older Americans are living below the poverty level. These 
are older Americans who worked low-income jobs without pension 
benefits. These are older Americans who lived paycheck to 
paycheck, who couldn't save. These are older Americans who did 
not plan to live to 80, 90, or even older. Lifespan routinely 
assists older adults who are living on Social Security alone. 
Many are women without a substantial work history who rely on 
survivor benefits.
    Currently we are helping Mary, an 84-year-old widow who 
just has $1,400 dollars a month on Social Security and can't 
pay all her bills. When her husband died in 2018 she lost his 
pension.
    We also know about Sam and Angelica. We are working with 
them, both in their early eighties. Sam's former employer 
folded, taking his pension with him. They counted on the three-
legged stool. But with Angelica's illness, most of their 
savings are now gone. I received a call from their daughter 
from Columbus, Ohio. She told me the father said, ``I hope we 
just die. This is too stressful.''
    Lifespan is also home to the Upstate New York Elder Abuse 
Center. Older adults who are financially abused all too often 
lose everything but Social Security.
    We are helping Jim. Jim is a 62-year-old contract employee 
who suffered a brain injury. While recovering, his son drained 
his accounts. His only remaining income is Social Security. And 
I wish this was an isolated story, but in New York State alone 
260,000 older adults will be a victim of elder abuse or 
financial exploitation this year.
    The outlook for future retirees is wobbly, at best. The 
three-legged stool of retirement, pensions, personal savings, 
and Social Security is, for many, history. Only 38 percent of 
Baby Boomers expect to have a pension. A 2016 GOA report says 
48 percent of Americans are approaching retirement who have 
nothing saved in a 401(k) or other retirement accounts.
    Profound changes in retirement funding have occurred over 
the last two decades, yet our knowledge of financial literacy 
is woeful. As one retiree recently told me, ``When you had a 
pension, they took care of it. Now they tell you you have to 
take care of it. Then the stock market goes up and down. It is 
very hard to understand, and it is very hard to be sure of 
anything.''
    And finally, of course, I must address the age wave. Today 
about 52 million Americans are 65 or older. In 10 years, 72 
million. And by 2040, 82 million Americans will be 65 or older. 
As president of an organization assisting older adults I can 
emphatically tell you that Social Security is critical. To 
survive is the bedrock of retirement security for older 
Americans. Change must occur. But this change cannot include a 
benefits cut. The retirement crisis is real, both at the 
federal and at a very personal level for older Americans.
    Thank you very much.
    [The prepared statement of Anne Marie Cook follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. Thank you for your testimony.
    I now recognize Mr. Hanner for five minutes.

                 STATEMENT OF JAMES DALE HANNER

    Mr. Hanner. Chairman Yarmuth, Ranking Member Womack, 
Members of the Committee, I want to thank you for inviting me 
to speak at today's hearing on retirement security on the 21st 
century. Hello. I am Dale Hanner, retiree and secretary-
treasurer of the North Carolina Committee to Protect Pensions. 
I am retired with 36 years of service with four different 
companies and a Central States Pension plan, a multiemployer 
pension plan is--which is facing insolvency within six years. 
This multi-employer plan has allowed me to build and retain 
years of service that would have been lost in a single employer 
plan.
    The purpose of the North Carolina Committee is to educate 
and advocate for the more than 12,000 Central States' members 
retired and active in our state. NCCPP is a member of the 
National United Committee to Protect Pensions.
    I would like to tell you about a few of our survivor 
members and their situation. In their generation Central States 
offered a survivor benefit package requiring retirees to 
forfeit 15 percent of their pension in order to leave 50 
percent of their pension to their surviving spouse.
    One member's husband pension was $1,375 per month. After 
his death her survivor benefit is now $750 a month. She has had 
to forgo two medicines because of high cost. She pays her 
hospital bills and those of her late husband in monthly 
payments.
    Another member's husband's pension was $700 per month. 
After his death her pension is $385 dollars a month. She is 
diabetic and pays $600 for a 90-day supply of insulin. This is 
an out-of-pocket expense for her.
    One 78 years young surviving member draws $318 of her 
husband's $630 pension. She works at least three days a week to 
supplement.
    As you can see, these are not large, hefty pensions that 
are being collected. In fact, the average monthly pension 
payment to a Central States retiree is $1,200. So any potential 
cut in retiree benefits would be devastating.
    In addition to food, property tax, and housing maintenance, 
the North Carolina public utilities and property insurance 
companies intend to petition the state for rate increases this 
year due to damage to the State of North Carolina from two 
hurricanes. Gas has increased 25 percent--$.25 in the last two 
months. The cost of living keeps going up. Once we retire there 
is no cost of living in our pensions.
    Stories have circulated on Capitol Hill that one of the 
conditions for a pension fix is that retirees must have some 
skin in the game. Truthfully, some retirees are being skinned 
alive. Approximately 1,200 Central States retirees die each 
year. A close working colleague of mine has just finished his 
first week of hospice. He is a Vietnam veteran, has 28 years of 
service in Central States. The average age of a Central States 
retiree is 72 years old, with a life expectancy of 81, 
according to Central States.
    My friend is 70 years old, same age of his wife. In 2018 he 
spent 2,200 days in and out of the hospital and rehabilitation 
center after contracting a blood infection he picked up in the 
hospital resulting from a procedure to remove a nerve 
stimulator in his back. Could you imagine dying, not knowing if 
the financial security you planned would be provided for your 
surviving spouse?
    Representative King's bill, H.R. 397, is the best and the 
only real solution to help retirees and protect their hard-
earned pensions. It will avoid retiree benefit cuts and provide 
improved retirement security for retirees and workers. It will 
not only enable plans to secure the pensions promised to 
retirees and their families, but also direct remaining assets 
and all future contributions to fully protect benefits for 
active workers.
    H.R. 397's legislation would create non-taxpayer loans. Our 
pension fund has decreased from $16 billion to $13 billion 
within 2.5 years, and Central States is only 27 percent funded. 
Very soon Central States will not have enough money to qualify 
for a loan. Our fund will go insolvent, and we will be turned 
over to the PBGC. After paying to ensure our pensions since 
1974, we've been told that the PBGC payout will only be pennies 
on the dollar because the PBGC is broke.
    Please let us work together to find a solution. Time is 
running out for us. Thank you.
    [The prepared statement of James Dale Hanner follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. Thank you, Mr. Hanner.
    I now recognize Dr. Biggs for five minutes.

              STATEMENT OF ANDREW G. BIGGS, PH.D.

    Dr. Biggs. Thank you very much, Chairman Yarmuth, Ranking 
Member Womack, and Members of the Committee. Thank you for 
inviting me to speak on retirement security in the 21st 
century.
    Retirement savings is an exceedingly important topic for 
households, for policymakers, and for the U.S. economy. 
Unfortunately, there is a great deal of ignorance with regard 
to the adequacy of Americans' retirement savings. And I mean 
ignorance, literally. There are a great many facts in U.S. 
retirement savings and retirement incomes of which many elected 
officials are simply unaware, in part because the news media 
prefer to run the stories on a supposedly looming retirement 
crisis than articles acknowledging that, in fact, things are 
going fairly well.
    For instance, few readers of a national newspaper would 
know that more Americans are saving for retirement today than 
ever before, or that retirement plan contributions are up by 
nearly one-third, compared to the era of traditional pensions, 
or that retirees' incomes are rising significantly faster than 
incomes for working-age households. Most retirees today have 
incomes well above the 70 percent replacement rate that 
financial advisers say is enough to allow a retiree to maintain 
their pre-retirement standard of living.
    This doesn't mean Americans aren't worried. Yet these fears 
are rarely realized. Vanguard recently polled retirees whether 
they thought the nation as a whole faced a ``retirement 
crisis.'' A majority of them said yes. When asked if they would 
describe their own financial situation in those terms, only 4 
percent did. This isn't being Pollyannaish. Compared to other 
developed countries, Americans have substantially higher 
retirement savings, and U.S. retirees are much more likely to 
say they are able to maintain their pre-retirement standard of 
living.
    There are also things policymakers may believe that aren't 
facts at all. For instance, we hear that more Americans will 
retire into poverty in coming years. In fact, recent Census 
Bureau research has shown that the share of retirees living in 
poverty has dropped by nearly one-third over the past two 
decades. And the Social Security Administration projects that 
poverty will continue to fall through at least the 2030s.
    We also hear that Americans have no retirement savings. In 
fact, total retirement plan assets are six times higher today 
than when traditional defined benefit pensions roamed the 
earth. And recent Federal Reserve research has shown that the 
shift from traditional pensions to 401(k)s has not caused 
greater inequality in retirement savings.
    I point these things out because, unless we come to a 
common base of understanding with what is happening with 
retirement savings, we can't form policies to build on the 
successes of the U.S. retirement system. And that is what we 
need to do, build on our successes.
    401(k)s are already more widespread than traditional 
pensions ever were. And because both employers and employees 
contribute, total retirement savings are higher. 401(k)s have 
introduced automatic enrollment to increase employee 
participation, target date funds to automatically rebalance 
portfolios, and low-cost index funds to reduce fees. As a 
result, no longer do traditional pensions have either a 
management cost or rate-of-return advantage over 401(k)s.
    But we need to spread these successes. I favor making 
automatic enrollment universal, at least for employees earning 
above the poverty line. I also favor legislation like the 
SECURE Act, which would make it easier for smaller employers to 
offer retirement plans. The retirement plan coverage gap is 
smaller than many believe. Nevertheless, smaller employers 
still remain much less likely to offer 401(k)s, which are the 
most effective way to save for retirement.
    We also need to address the risk of high health costs in 
retirement. Note that I focus on risk. Out-of-pocket health 
costs have barely risen as a percentage of retirees' incomes 
over the past three decades, mostly because retiree incomes are 
rising so rapidly. But health costs can vary significantly from 
person to person. While government bears most of that risk 
through Medicare and Medicaid, I would favor having retirees 
bear a larger share of everyday costs in return for greater 
protection against the worst health cost outcomes.
    Finally, government at all levels need to get their 
retirement funding in order. The best research on retirement 
savings, the studies that are published in peer-reviewed 
journals rather than activist groups' websites, show only a 
modest retirement savings shortfall. But underfunding in Social 
Security, federal employee and military pensions, and state and 
local government pensions is estimated at between $14 and $26 
trillion. This is, by far, the biggest threat to retirement 
security, and should be addressed as promptly as possible, as 
fully as possible, recognizing the tough choices that are 
involved, and avoiding gimmicks. Thank you very much.
    [The prepared statement of Andrew G. Biggs follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. I thank all the witnesses for their 
testimony. Now we will start our questioning period.
    And first, the Ranking Member and I will defer our 
questions to the end, so I now recognize the gentlelady from 
Illinois, Ms. Schakowsky, for five minutes.
    Ms. Schakowsky. Well, we could have a war of statistics. I 
don't really want to get into it, although there are some data. 
I know that more than half of Americans can't withstand easily, 
without some sort of financial crisis, even a $500 hit on their 
income. And I have got some data here from--is that Motley 
Fool--that says that the amount of their investment analyst--
the average amount of money that older Americans have when they 
retire, or something like--was it $7,000?
    You know, you can shake your head, and, you know, you are 
smart, and you have got a lot of statistics. But the real world 
that I deal with too, and my constituents, is a very different 
world than is projected here. Even averages, I think, are 
really skewing toward the wealthiest Americans, because we have 
such a vast income inequality that if you start averaging out 
(sic).
    I just--I want to say that I volunteer at a food bank, and 
at the end of the month who do you see lining up? It's the 
seniors, because they have run out of their Social Security. 
And I think most Americans are wondering, can I retire? And in 
fact, the woman that was bagging my groceries not long ago, I 
am telling you, I definitely want to help her bag my groceries. 
She was clearly working beyond the age that she should be 
working, but not beyond the age that she needed to be working.
    I am the founder and co-chair of the Congressional Task 
Force on Aging and Families--used to be called the Seniors Task 
Force. We have had report after report from organizations, 
including the AARP and the retirement security groups, that 
talk about the challenges that older Americans face. And so I 
am glad that we have a piece of legislation that would deal 
with the issue right now and not try to hide it, I think, in 
some numbers that don't reflect what ordinary Americans--and in 
terms of women, by the way, you know, they are--they carry this 
income--this wage inequality with them into retirement. So many 
of the people--probably, I am sure, most of the people--that 
are living near poverty and relying just on their Social 
Security are women.
    I also wanted to say to the Ranking Member that, you know, 
``everyone is living longer'' is not true. There is a big 
disparity there, too. We've even seen an increase in white 
working class men, whose longevity has taken a bit of a dive. 
African-Americans, especially African-American men, aren't 
necessarily living longer, or living to see--and that is why 
raising the age of Social Security would be a significant 
problem.
    So, you know, our task force is going to be addressing this 
issue, and hopefully coming up in a bipartisan way with a 
solution.
    I wanted to ask you Mrs. Cook, what are the most common 
financial problems that you are seeing in Rochester seniors? 
What are the expenses that are most crippling to some of the 
people you serve?
    Mrs. Cook. Very clearly, it is health care costs, 
prescription drugs, out-of-pocket costs for copayments. And as 
a result of that, they can't pay the rest of their bills. They 
are making decisions on whether or not to pay their health care 
costs, or buy food, or pay for their utilities. And it is a 
terrible decision that older adults have to make.
    And in fact, we are seeing that really about a third of our 
clients--rather, our clients, about a third of their income is 
going to those health care costs that are rising, that we are 
seeing are rising.
    Ms. Schakowsky. And hopefully we are going to be dealing 
with the cost of prescription drugs also in this session of 
Congress.
    So again, Mrs. Cook, do the seniors' lifespan that you work 
with generally have savings that they are able to rely on? What 
has been your experience in the amount of money that they have 
been able to put away?
    Mrs. Cook. They have tried to save.
    I am going to go back to my story about Sam and Angelica, 
because I recently met with this couple. They put three kids 
through college. They saved $30,000, which was difficult for 
them going into retirement. But Angelica has dementia, and she 
requires home health care aides, and they have gone through 
that money. Their small pension and Social Security isn't 
making it any more. And they honestly do feel that death is 
their only option.
    And so that is what folks are dealing with today, that kind 
of anxiety, that kind of pressure, and all based--because they 
just don't have enough money to survive.
    Ms. Schakowsky. Thank you. I yield back.
    Chairman Yarmuth. Thank you. The gentlelady's time has 
expired. I now recognize Mr. Stewart of Utah for five minutes.
    Mr. Stewart. Thank you, Chairman and Ranking Member, and 
members of the--sitting at the witness table.
    And, you know, I am honored to serve on this Committee. I 
actually asked and pressed for this. I sit on two other 
Committees, Intelligence and Appropriations; they are very 
busy. But I wanted to sit on this Committee because I am 
interested in these topics. It is the reason I ran for Congress 
six or seven years ago, because I thought we are committing 
national suicide with some of our spending and our debt, and 
some of the fiscal policies and decisions that we were making. 
It's the reason that, again, why I ran, and why I wanted to be 
here.
    And my background lends me to sympathy on these. My father 
was an Air Force pilot, a farmer, and a schoolteacher. My 
mother raised 10 kids, if you can imagine. And they were not 
wealthy. They were a family of modest means. But they paid into 
Social Security, and they expected that that would be there for 
them in their retirement. And I think everyone in this room 
wants--and we want to facilitate that same expectation to save 
this program for those people who most need it and are relying 
on it. We want to protect Social Security.
    But I read something recently--and this is well quoted, I 
am sure you all are aware of it--where young people were asked 
if they--what they believed was more likely, UFOs or that they 
would have Social Security when they retired. And more of them 
believed in UFOs than that they would have Social Security. 
And, you know what? They are right. That is not a bad bet, 
because there might actually be UFOs. I don't think there are, 
but it's a possibility. But if we don't fix this, then it is a 
mathematical reality that they won't have the other.
    And so, as absurd as it sounds, it is not foolish for them 
to take what might be at least possible, and taking that over 
something that is mathematically impossible if we don't fix it. 
And that is why these hearings are very important.
    The good news is--and there is good news--and that is we 
can we can fix this. It is not impossible. There is still time 
to fix it. And we can do it without impacting retirees now, 
without those who are relying on it now, which is something 
that I think all of us are committing to do it. But it needs to 
be done on a bipartisan basis.
    And one last thought on this. We have been told this is the 
third rail, as a politician you are foolish to touch it. I 
think that's nuts. That has not been my experience at all. When 
I talk about this with my constituents and others, they are 
begging us to fix it. They are not stupid. The American people 
aren't stupid. And you tell them, ``This is what it is going to 
take to fix it.'' In a bipartisan manner, people like me are 
going to have to consider that we have to look at the tax side 
of it. I am willing to concede that, and accept that. And it is 
hard for me to do. I didn't come to Congress to raise taxes, 
but I recognize that is part of the equation.
    I think we also have to consider raising the retirement 
age, looking at COLA adjustments, looking at means testing. But 
if someone is not willing to consider all of those options, 
then they are not serious about fixing this. And they are, 
frankly, part of the problem now. And it is going to take all 
of those to do that.
    So Dr. Biggs, I could ask you--this is a yes-no question, 
and then I want to get to something that really matters. Do you 
believe that the best and first option and only option is 
raising taxes? Or is it going to take more than that?
    Dr. Biggs. No. It will take both sides.
    Mr. Stewart. Clearly, it is going to take more than that. 
And I want to emphasize something--and this will sound 
dramatic--but I want you to give meat on this bone. What does 
it mean if by--the projections are by the 2030s or so--that we 
actually bankrupt this system, that we are not able to make the 
payments, what does that mean to someone? Help people 
understand. Because I think people generally think, well, you 
know, that is going to affect someone else, or it won't affect 
me. What will that mean to someone who is relying on Social 
Security at that point?
    Dr. Biggs. Well, the kids who think it is more likely they 
will see a UFO are not correct. They will see Social Security. 
If we do see UFOs, I hope they bring money with them that we 
can use. But Social Security, as long as it is collecting 
payroll taxes, can continue to pay benefits. It will not become 
bankrupt in the sense of paying nothing. But once the trust 
fund runs out in 2035, Social Security has no legal authority 
to pay the full promised benefits. It can only pay with the 
money it has on hand. That implies a 20 percent-plus reduction 
in benefits, not just for new retirees, but for all retirees, 
not just for retirees themselves, but for disabled, for 
survivors.
    So this is sort of the worst-case outcome you are trying to 
avoid. You know, we can fix this. But to leave it to last 
minute means the choices get bigger and get more difficult. And 
so it is always better to do it sooner than later.
    Mr. Stewart. Well, then in the 15 seconds I have, would 
that required 20 percent--would that be across the board, or 
would there be--the government have discretion on who that--
those cuts would be applied to?
    Dr. Biggs. It would probably not have discretion. You would 
need--to do that you would need new legislation.
    Mr. Stewart. So those on the very lowest, as well as those 
on higher income, they would also be impacted with the 20 
percent----
    Dr. Biggs. When I was at the Social Security 
Administration, that was our interpretation.
    Mr. Stewart. All right, thank you. Chairman, I yield back.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from New York, Mr. Morelle, for five 
minutes.
    Mr. Morelle. Thank you, Mr. Chairman, first of all, for 
hosting this hearing, which is critically important, as I think 
all of our witnesses have testified to.
    A promise made, in my view, should always be a promise 
kept. However, for too many Americans the promise and assurance 
that Social Security represents is quickly fading away, as we 
have learned this morning. After a lifetime of hard work and 
paying into the system, every person deserves to enter their 
later years in life with the peace of mind and the knowledge 
that Social Security will be there for them. Yet fewer dollars 
are going into Social Security than are being paid out, and the 
program is in danger of being insolvent, as we have heard 
mentioned several times this morning.
    In my view, this is simply unacceptable. It is critical we 
strengthen resources available to older community members, 
protect essential programs like Social Security, and address 
the multiemployer pension crisis which has been talked about 
this morning, so that current and future generations could 
depend on the benefits they have received.
    I am encouraged by our friend and colleague, Representative 
Larson, who is taking meaningful steps to safeguard access to 
Social Security and ensure the long-term viability of the 
essential program for years to come through the Social Security 
2100 Act, which I am proud to cosponsor and support, and I hope 
it comes before the House soon for consideration.
    I did want to go to one of the--what I think I heard. My 
understanding of Representative Larson and those who have 
looked at it actuarially, that a modest increase in the Social 
Security tax for those individuals earning $400,000 or more 
would actually make it not only solvent, but sustainable. And 
that does not involve benefit cuts.
    Dr. Biggs, have you seen that analysis? And do you disagree 
with the actuaries who have looked at that?
    Mr. Biggs. I have read the actuarial memo on the Social 
Security 2100 Act. What it would do would be phase out the 
taxable maximum wage for Social Security beginning at $400,000. 
But eventually all wages would be subject to the tax. That 
implies a 12.4 percent effective marginal tax increase on high 
earners, which means that your top tax rate goes up by 12.4 
percentage points, so then we are in, you know, Scandinavian 
territory.
    So it becomes a question of modesty on that. The--more 
recently, the Penn--University of Pennsylvania Wharton School 
used an economic model to simulate the Social Security 2100 
Act. And they found when you took into account the changes in 
benefits, the benefit increases, and the changes in taxes, it 
would shrink GDP by 2050 by about 7 percentage points, relative 
to a solvency plan that relied on benefit cuts. That's about 
$2.6 trillion in these terms. So the economic effects of 
raising those taxes and increasing benefits are pretty 
significant.
    Mr. Morelle. The benefit----
    Dr. Biggs. And the actuaries don't account for any of that.
    Mr. Morelle. And the benefits you are talking about are the 
benefits that would accrue to people earning more than 400,000 
who would be paying an additional amount in? Those are the 
increased benefits? Or are you are talking about----
    Dr. Biggs. Because the Social Security 2100 Act increases 
benefits across the board, relative to promised levels.
    Mr. Morelle. I want to go back to something, Ms. Cook, that 
you talked about your testimony, which is--dealt with financial 
literacy. And do you have a sense--I ask two things. One is, 
first of all, the relative awareness that people have, 
financial literacy for people who are in the retirement years, 
and then also for younger people.
    And I don't know how much your organization talks to 
organizations that represent schools and universities and 
others that would, hopefully, be in a position to start talking 
about financial literacy to younger people, because, obviously, 
the sooner you start--can you just tell me your sense of 
financial literacy among the retirees that you have, how 
prepared they were for what they now face?
    Mrs. Cook. Congressman, what we see is they are not 
prepared at all, and that they struggle when they have to make 
decisions about investing their own 401(k)s or other accounts. 
They just have not had that kind of training. We are trying to 
figure that out, and help them along the way to give them that 
kind of information.
    In terms of younger people, I don't know, but I think right 
now we are woefully lacking education in financial literacy so 
people can prepare for retirement.
    Mr. Morelle. Well it seems to me strengthening Social 
Security is obviously an imperative here. But to the point that 
you just made, I would argue--I say this to my children all the 
time--I know you are in your early--late twenties, early 
thirties. You should start thinking about this, because it will 
come much sooner than you think it will. Because I feel like I 
am 30 still, and it has come much faster than I would have 
expected.
    But I think this is really important, particularly with 
people entering the workforce, to give serious thought to what 
they are going to do in the out years. So strengthening Social 
Security and making sure they have financial literacy, it seems 
to me, are critical objectives that we ought to achieve.
    So thank you all for your testimony.
    Chairman Yarmuth. The gentleman yields back. I now 
recognize the gentleman from Pennsylvania, Mr. Meuser, for five 
minutes.
    Mr. Meuser. Thank you, Mr. Chairman. Thank you all very 
much for being here with us.
    Dr. Biggs, I would like to first ask you, please, what do 
you think of the Social Security 2100 Act, in broad terms or 
specific terms?
    Dr. Biggs. Well, if you go back--it is worth--Congressman 
Larson talked about the 1983 reforms, where President Reagan 
and the Democratic House and the Republican Senate came 
together to produce a package to fix Social Security. That was 
roughly 50 percent tax increase, 50 percent benefit cuts. I 
mean, you know, you can qualify things that you want, but it 
was roughly half and half.
    The Social Security 2100 Act--and I agree you need to have 
bipartisan cooperation on this, that's how it's going to 
happen. The Social Security 2100 Act is more than 100 percent 
tax increases. It raises taxes to fully pay for promised 
benefits. And then it raises taxes by a greater amount in order 
to increase benefits, to expand Social Security.
    Realistically, that is not going to happen. So people need 
to come together and--as you were talking about, Congressman 
Stewart--say what things you are willing to give on. If your 
starting point is more than a 100 percent tax increase, I think 
that is going to be a difficult bipartisan lift.
    Mr. Meuser. Okay. When you mentioned Scandinavian levels, 
so basically we are talking about 37.5 plus 12.4?
    Dr. Biggs. Plus Medicare taxes. In some states, state 
income tax rates are as----
    Mr. Meuser. Before state income tax----
    Dr. Biggs.--are as high as 10. California is 13 percent. It 
gets to the point where, if you think you are ever going to 
afford Medicare for all or something like that by taxing the 
rich, you will never do it because your top tax rates--you will 
be tapped out on----
    Mr. Meuser. Over 50 percent.
    Dr. Biggs. Well over----
    Mr. Meuser. Scandinavian levels.
    Dr. Biggs. Well over 50 percent.
    Mr. Meuser. So my next question, then. What recommendations 
can you make that would improve the long-term solvency of 
Social Security?
    Dr. Biggs. Well, there is a lot of research that shows that 
middle and high-income folks, the folks who have 401(k)s, are 
financially literate, they trade their personal savings off 
against Social Security. If you raise your Social Security 
benefits, they will, in fact, save less. If you lower their 
Social Security benefits, at least on a kind of long-term 
basis, they will save more and they will work longer. So for 
those folks it is acceptable to slow the growth of benefits 
because they will make it up on their own.
    The same research tends to show that lower-income folks 
aren't as responsive to those incentives. For those folks I 
favor not just maintaining promised Social Security benefits, 
but expanding them, making the safety net stronger. That is a 
way we can make the make the program work for the people who 
need it the most, while letting people who can afford to save 
more and work longer do so. That is the most sustainable route 
to fixing Social Security, but also leaving a little room in 
the budget for the--all the other things the government does.
    Mr. Meuser. The taxable maximum on Social Security 
increases--and that is the question--every year?
    Dr. Biggs. Along with the rate of wage growth. So wages 
grow faster, the taxable maximum grows----
    Mr. Meuser. So how much each year?
    Dr. Biggs. It is--right now it is 132.7, so roughly 4 
percent per year.
    Mr. Meuser. Four percent per year?
    Dr. Biggs. That is the projected nominal rate of wage 
growth.
    Mr. Meuser. Okay. So over a 10-year period, clearly, we are 
going to be 40 percent higher, which is in the neighborhood of 
$165,000 or----
    Dr. Biggs. Sure.
    Mr. Meuser.--where we are today. Okay. So it is increasing 
every year. So all of those at that level, more or less, are 
going to be at a 42 to 43 percent tax range already, with--when 
you add the income tax plus the FICA, the----
    Dr. Biggs. Exactly. So for those folks, eliminating the 
taxable maximum, or phasing it out, as Social Security 2100 
would do, those people are not millionaires and billionaires. 
They are somebody making $150,000, which is a good standard of 
living.
    Mr. Meuser. Right.
    Dr. Biggs. But it is not necessarily who you think you are 
hitting.
    Mr. Meuser. And with state tax, it is near 50 percent. So 
their take-home income is in the neighborhood of $90,000. They 
are paying nearly $70,000 year in federal and----
    Dr. Biggs. Sure.
    Mr. Meuser.----state taxes. What about the age question? 
What are your thoughts on that?
    Dr. Biggs. It is true that Americans are, on average, 
living longer. But there is a wide disparity. The richest 
Americans, as a guess, would live about eight or nine years 
longer past retirement than the poorest ones. The poorest ones 
are much more dependent on Social Security.
    I am not against raising the retirement age as a signal to 
people to work longer. They will. The research shows they will 
accept that signal, and they will work longer. But I would also 
make other changes within Social Security to protect the people 
who are on the bottom, who are the poorest people, who don't 
live as long, to make them whole.
    So raising the retirement age isn't the only thing you do. 
There is other parts of the package, and we can fix it so it 
will not hurt the people on the bottom.
    Mr. Meuser. Thank you. Thank you, Mr. Chairman. I yield.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Virginia, Mr. Scott, for five 
minutes.
    Mr. Scott. Thank you, Mr. Chairman.
    Dr. Biggs, you mentioned the fact that when Social Security 
so-called goes broke they can still make payments. You know 
what percentage payments they can make?
    Dr. Biggs. I think around 80 percent.
    Mr. Scott. And the inflation adjustment, as we go forward, 
is the wage growth. You know what that 80 percent would be, 
compared to just regular inflation?
    Dr. Biggs. The wage growth adjustment is made to the 
taxable maximum. I am not sure I am 100 percent understanding 
the question.
    Mr. Scott. The benefits? The benefits go up, too?
    Dr. Biggs. Yes. Oh, that is correct, yes. Benefits--
scheduled benefits under Social Security rise roughly with 
wages each year, so about a percentage point faster than 
inflation. So some people say even after that 20 percent cut 
they would be higher than today. I am not 100 percent sure, 
but----
    Mr. Scott. Okay. But you indicated the sooner the better. 
Why is it better to do some--fix it sooner than later?
    Dr. Biggs. Well, it gives people more time to respond. If 
you think about the current increase in the retirement age, it 
was passed in 1983. It didn't even begin phasing in until 2000. 
It is not fully implemented until age 67 until, I think, 2022. 
You don't hear anybody, you know, yelling and screaming about 
the retirement age today because they have had so much warning. 
If we leave it till 2035, then we have to pull the rug out from 
underneath people, and that is very, very hard.
    Mr. Scott. Thank you. Mr. Hanner, you talked about the 
multiemployer pensions and the problems with the failure of the 
multiemployer pensions. What would happen--what effects to the 
federal budget would occur if these pensions failed?
    Mr. Hanner. To the federal government you would have the 
revenue off of, I think it is, 1.5 million workers. You would 
lose that revenue right off the bat.
    Mr. Scott. The taxes they would be paying.
    Mr. Hanner. The taxes they would also lose.
    Mr. Scott. And the increased utilization of food stamps and 
Medicaid?
    Mr. Hanner. They would have to turn somewhere. To eliminate 
your pensions I think you change from a retirement--maybe a 
comfortable retirement--to a survival mode. And there is a big 
difference between a comfortable retirement and a survival 
mode. Like the congressman said, you know, you run out of food 
at the end of the month.
    Mr. Scott. What are your proposals to fix it?
    Mr. Hanner. The Neal bill, H.R. 397. It seems to be the 
best approach to it whatsoever. It seems to be the cheapest 
approach to it whatsoever.
    Mr. Scott. Thank you. Mrs. Cook, there are a lot of 
students with significant student loans. What effect does a 
student loan have on your ability to save for retirement?
    Mrs. Cook. Well, it makes it almost impossible. And, you 
know, I was talking to someone the other day. They had student 
loans until they started helping their children go to college. 
So, I mean, you take all of those earning years in which they 
are paying back their own student loans, and then trying to 
help their children, it makes savings very difficult.
    Mr. Scott. And the fact that you have to start 10 or 20 
years later saving up for your retirement, because you had to 
pay the student loans, what does that have (sic) on the 
ultimate size of the nest egg?
    Mrs. Cook. Well, it makes it almost impossible to have that 
third-legged stool of savings, and anything significant. And 
what we have seen is, even when people have saved, once they 
have a health issue of any kind that savings they go through 
very quickly.
    Mr. Scott. Do you know the effect of immigration reform, 
what that would have on Social Security?
    Mrs. Cook. Sir, I don't know.
    Mr. Scott. Dr. Favreault, do you know?
    Dr. Favreault. Yes. We can think of immigration as akin to 
adding births to the population, in the sense that--except they 
are a little bit older. So you are going to have more workers 
per beneficiary, and that is an excellent thing for Social 
Security's health.
    The Social Security Trustee's report has some information 
in the appendix about immigrants adding, say, roughly 300 or 
330,000, on average. That could have an effect of about nine--
reduce about 9 percent of the shortfall. So definitely a strong 
labor force is an integral part of----
    Mr. Scott. Essentially, because they would be coming and 
paying, and nobody coming in would be receiving.
    Can you say a word about the effect of the gig economy on 
people's ability to save?
    Dr. Favreault. Yeah. I think it is a really important 
question. Obviously, there are a great diversity in gig 
workers. We see that those who are gig-only often have very, 
very little retirement savings. Very few are participating. 
Those who are both gig and also have an additional full-time 
job are a little bit more likely to be prepared. But those were 
gig-only, again, extremely vulnerable.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Oklahoma, Mr. Hern, for five 
minutes.
    Mr. Hern. Thank you, Mr. Chairman and Ranking Member 
Womack. And thanks to all of you today for being here to 
testify on this.
    You know, as a taxpayer and a person who believes that our 
country's greatest threat is our--I guess it is our 3D problem: 
our deficit, our debt, and our demographics issue.
    And, you know, I appreciate we are having this conversation 
about mandatory spending. I say it is not an entitlement, and 
we have talked about that. You know, a lot of people get that 
wrong. I think it is us taking the good faith and credit of the 
United States, and believing in that promise.
    And you know, according to the Board of Trustees for Social 
Security and Medicare, if Congress does nothing both will be 
insolvent within the next 25 years. Insolvency, as we have been 
describing, is--you know, we can debate that all day long. And 
this is a grim reality for the working-class Americans who have 
spent their entire lives paying into the system with the 
promise that money will be there when they need it.
    I have got to confess I grew up extraordinarily poor: food 
stamps, no running water. I have heard my entire life that 
Social Security would never be there for me. I have never 
counted on it. I think most Americans, truthfully, when they 
are younger and they are working, they don't count on it. They 
work as if it is not going to be there, and some money shows up 
at the end of their lives, and they are appreciative for that.
    My questions today, I have got a multitude of questions, 
but just as sort of a fact-finding mission--and Dr. Biggs, I 
appreciate your outlining here the 13 things you didn't know 
about, or probably wish you knew, or whatever. But let me just 
ask some questions, and maybe just simple yeses or noes. Or if 
you want to expand on them, that would be great. But wage 
growth helps close the gap on Social Security deficits, does it 
not?
    Dr. Biggs. Yes, it does.
    Mr. Hern. Lower unemployment helps close that gap.
    Dr. Biggs. Yes, it does.
    Mr. Hern. And we have, like, the lowest unemployment in 
recorded history, at least in the history that I have read 
about.
    Dr. Biggs. Since the late 1960s. yes.
    Mr. Hern. Legal immigration to replace a scarce resource-
available workforce would be very beneficial--legal workforce--
to close this gap.
    Dr. Biggs. Yes.
    Mr. Hern. We have 7.6 million jobs unfilled. If we had 
those filled we would also help replace this need. And we could 
talk about why we also need legal immigration. We have a 
workforce that has been depleted, if you will. And let's talk 
about some facts on that.
    We can talk about our pro-choice conversations that we have 
had, hundreds of thousands of abortions. We could also talk 
about our low birth rate, just described today in The Wall 
Street Journal as the lowest in 40-something years, and not 
getting any better.
    We also could talk about again our aging population, as we 
described, as the Chairman described in his opening comments.
    Could you also help me understand? Because I have heard a 
lot of numbers. What has been the average rate, or ROI or 
return on the investment of Social Security invested dollars in 
the United States?
    Dr. Biggs. There is two ways of thinking about it. One is 
the rate of return on the Social Security trust fund, and that 
is invested in special-issue government bonds. Right now 5 
percent, I would think. Then there is the rate of return that 
the individual gets from the program. They pay money in and 
they get money out.
    Mr. Hern. That is really all that matters to me----
    Dr. Biggs. And you can calculate an interest rate from 
that. That started out extraordinarily high. The early 
generations of Social Security couldn't have done better in 
Vegas. They made a lot of money on it, because the benefits 
were relatively generous. They had a short career of paying low 
taxes. But that's a seesaw, and they gained a lot of money. 
Future generations' Social Security, one way or the other, no 
matter how you fix it, will be a money loser for future 
generations, simply because the early generation got such a 
good deal.
    Mr. Hern. So the argument----
    Dr. Biggs. So whether you raise tax or cut benefits, it is 
going to----
    Mr. Hern. So there might be a viable argument in there, as 
we have heard about since the 1990s certainly, about some self-
directed ability, if you had the ability to self-direct some of 
that. That is for open debate. We could spend a day talking 
about that.
    Does a growing economy and robust markets help close the 
funding gap?
    Dr. Biggs. It will, but it will not close it by itself.
    Mr. Hern. Would it also--and I am sorry I can't see your 
name there, sir, next to you there, but--we are talking about 
pensions. Would that also--a growing marketplace, robust 
economy, does that help close the pension gap?
    Mr. Hanner. It would seem to be, there would be more people 
hired.
    Mr. Hern. So an investment of your funds into certain 
investments that gets a better return, if there is a return as 
opposed to a loss, if you are--from the investment side of 
your--those dollars you have taken.
    Mr. Hanner. If we were able to invest in the market. Since 
we have gotten so low, dipped so low, our money has been put 
into guaranteed interest. We can't afford a drop in the market.
    Mr. Hern. Perfect conversation. Our national debt and our 
annual deficit are keeping those interest rates really low. The 
day of getting 5 percent returns are gone, because we know for 
every 1 percent we add, that is $200 billion in additional 
deficit every year. And so we know that that is a problem. So 
our deficits and our debts are having problems across the 
board. And having the fallacies of us promising something with 
pensions, defined benefit programs, or our Social Security is 
going to be problematic if we can't figure out how to get a--
control our deficits, debts.
    And I would just like to say one thing--and I know I am 
over, Mr. Chairman--but in reference to the student loans, I 
think it is safe to say that if anybody in here that had a 
student loan would raise their hand would also not like to have 
ever paid it back or pay it back. So--but that is an obligation 
that you promised and signed upon to take to go get a four-year 
education. And I think we have got to be really careful about 
forgiving student loans because that is an investment in your 
future. And so you should invest wisely. Thank you. I yield 
back.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from California, Mr. Peters, for five 
minutes.
    Mr. Peters. Thank you, Mr. Chairman. I was a little 
frustrated by the discussion we had. I felt like people were 
talking past each other. It is pretty obvious that, from Dr. 
Biggs, a lot of people are doing fine, the economy is good for 
a lot of people, people have saved. That is terrific. They 
didn't--that didn't really address the distributional effect of 
people who aren't doing well. We really need Social Security to 
keep them out of poverty.
    And I think what really occurred to me is that, you know, 
we call it an insurance plan, but really, Social Security is 
more like a retirement plan because we pay it out to people 
even if they don't need it. Insurance you call on. You pay a 
premium every year. You call on it when you need it. And we 
don't--that is really not what Social Security is, because 
people who don't need it, like Mr. Biggs or Dr. Biggs 
described, are still getting the payment. And they could adjust 
for that. And to me, that is--that strikes me as an opportunity 
for some discussion.
    We talked a lot about a lot of other issues that we put on 
Social Security that we should be dealing with separately. The 
cost of health care is a separate issue. If the cost of health 
care was cheaper, that would certainly be good for the people 
that I think you are concerned about.
    We talked a little bit about tax policy and deficits. I 
mean, I have got to tell you that I think that one of the 
saddest things we did was the tax cuts we did last year for 
people who didn't need them. They didn't need tax cuts. We 
overshot the corporate tax cut by a good 4 or 5 percent from 
even what Mitt Romney and the Business Roundtable had been 
asking for, and then we talk about deficits here. I opposed 
that, I think that was unwise policy.
    And I do think that student loans is still a burden on 
folks. I think they should be--I don't believe in free college, 
but I also don't believe in gouging people with 6 or 8 percent 
loans, when the cost of money to the federal government is 
something around 3 percent. So we talked a lot, at least 
obliquely, about a lot of issues here.
    But one thing I wanted to raise was that I think we ought 
to have a more direct approach to retirement.
    We have a minimum wage in this country. It is actually--
when I was working for the minimum wage it was, I think, $2.65 
an hour. I don't think anyone suggests the minimum wage should 
not have been--should not have risen. Even Dr. Biggs probably 
think there is some role for raising that. Now it is at $7.25. 
I think we are due for another increase.
    One part of that increase might be suggested by the Saving 
for the Future Act, which I have introduced in the House with 
Representatives McBath and Blunt Rochester--it has been 
addressed in the Senate by Senator Coons and Klobuchar--which 
would--since we have a minimum wage we don't have a minimum 
contribution to retirement, and this would make a $.50 minimum 
retirement contribution, so that when--over the course of your 
career, if you work the whole time, and just with that minimum, 
it would generate over $600,000 worth of savings for people.
    That could be combined with a minimum wage increase, so 
that if you didn't want to go all the way up to $15, you could 
say, well, $14.50 plus $.50 for retirement, that would be a 
good compromise. Or some other area. I mean, I think there is a 
lot of approaches to addressing the minimum wage, but a minimum 
retirement contribution would make a lot of sense. And it would 
take a lot of the pressure off of Social Security, because 
employers would be paying into it over time.
    Dr. Biggs, does that strike you as a constructive way to 
deal with some of these issues, in terms of making sure that 
everyone has a decent retirement?
    Dr. Biggs. Well, I think I--when I hear the minimum wage, 
the research on the minimum wage, I think, is more nuanced than 
many people today think it--it won't destroy jobs, but if you 
go--I live in southern Oregon, right on the northern California 
border. A $15 minimum wage in those areas would be difficult.
    Mr. Peters. And just so--just to be clear, I favor the--
Terri Sewell's approach, which is a regional minimum wage. So 
California, $15 is fine for us, but maybe it is different in--
but as a way to get up to $50?
    Dr. Biggs. My--part of--I think about the Save For the 
Future Act. Part of me says, oh, I don't want to have a mandate 
on businesses to do these certain things. And I understand 
that. On the other hand, though, I would personally much rather 
increase retirement savings for those who need it through a 
personal account-type program that you are talking about than 
trying to do it on the Social Security side, which is--I think 
it is just much more difficult on the tax----
    Mr. Peters. Well, I didn't suggest the Social Security 
side, but three out of 10 workers lack access to a retirement 
plan today. Forty five percent don't participate. That is not 
good for the country.
    Dr. Biggs. Sure. The coverage gap is some--two things I 
point out: close the coverage gap, make auto enrollment 
universal. That solves so many problems, and it does it in a 
very easy.
    Mr. Peters. And finally, I don't want to--I think that the 
response, Mr. Hanner, was a little bit cavalier. My father also 
had his clergy pension cut. He was so careful with his money. 
He depended on that pension. He had every right to depend on 
that pension. And I think speaking in generalities doesn't 
really address the pain that happens in those families, and I 
want to acknowledge that. And I yield back.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Texas, Mr. Crenshaw.
    Mr. Crenshaw. Thank you, Mr. Chairman. Thank you for 
holding this very important hearing.
    I am going to talk for a minute to the Millennials in the 
room, and to the many Millennials glued to C-SPAN right now, 
watching this--I say sarcastically--watching this extremely 
important discussion on Social Security. This is going to 
affect my generation. I am a Millennial, albeit an elder 
Millennial. And Social Security is one of the most important 
issues that my generation faces. We all agree it is on a path 
to insolvency. Americans aren't saving enough. We aren't secure 
enough in our retirement. The question is then, what do we do? 
And we have to frame the options, I think, very clearly.
    First of all, let's come up with the realization that 
Social Security is not a retirement program, it is a program 
meant to keep seniors out of poverty--originally its intention.
    And another thing we should point out is that we actually 
generally agree on progressive solutions to fix it. But there 
is two ways to add money into the program in a progressive way: 
one is through taxation and one is through benefits.
    So, let's look at the Social Security 2100 Act. This 
represents the extreme end of using tax increases to achieve 
solvency. Millennials watching C-SPAN should not be very fond 
of this idea. What we are effectively doing is we are 
transferring wealth from the young to the old. It is also the 
least efficient way to redistribute wealth if our goal is, 
indeed, that. And I actually think it is. You are taking money 
out of people's paychecks when they need it most, when they are 
trying to start a family, start a business, buy a home, or save 
for retirement, which I think we all agree is a problem--
Americans are not saving enough. And according to the 2100 Act, 
this money would be transferred mostly to wealthy retirees.
    I hope Millennials are listening to this. This is deeply 
unfair, and it is bad for economic growth. In fact, according 
to that Wharton study, it decreases economic growth by a whole 
2 percent by 2049. That seems like a small number. But in 
reality, that is an enormous absolute number.
    The other way that we can look to make Social Security 
solvent is, of course, through benefits. How do we do that? We 
have to question does it make sense for the wealthiest among us 
to have an increase in benefits after they have had their 
entire lives to save, their entire lives to create the 
businesses they want to do, and create wealth? Does that make 
sense, or does it make sense to focus on the true purpose of 
Social Security, which is to keep senior citizens out of 
poverty and focus on benefit increases for them?
    If we are going to be progressive about this, it should be 
in the latter parts of life. We should not tax the very people 
who need their money the most, my generation, to transfer that 
to the wealthy.
    Okay. Don't worry, Millennials, we are going to put that on 
YouTube. I know you are not watching C-SPAN.
    [Laughter.]
    Mr. Crenshaw. All right, Dr. Biggs, will you talk for a 
second about the economic differences between the benefit and 
taxation debates?
    Dr. Biggs. Sure. If I could just touch on the generational 
differences first, I think you hit on something very important. 
And this applies to the Social Security 2100 Act. Benefits are 
increased immediately under that proposal. The tax increases 
are phased in. You know, it is--you can say, well, today it is 
only a cup of latte or something. Once those tax increases are 
fully phased in, for an average wage worker it is an extra $50, 
a week or $50 a month they have to pay.
    So it is--when you are increasing benefits immediately but 
phasing in the tax increases, it means that future generations 
of workers, they have to pay for not only their own benefit 
increase, but for the benefit increase that came to today's 
retirees who didn't pay for it. So generationally, this is 
shifting more of the costs to future generations.
    On the economic side it is--you know, people disagree about 
the effect of taxes on, you know, work incentives and economic 
growth. But there is agreement that, in general, if you raise 
taxes people are going to work less. You know, we don't know 
the size, but we know they are going to work less.
    There also is a lot of research finding for middle and 
upper-income folks that if you raise Social Security benefits 
they will save less.
    Now, in a simple textbook economic model, if people work 
less because of higher taxes and they save less because of 
higher benefits, you will in fact have a smaller economy in the 
future. The Penn Morton model projects a 7 percentage point of 
GDP difference come 2049 from the Social Security 2100 Act 
versus kind of a benefit-cuts-only act. That is an enormous 
amount of money that we are we are giving away, essentially, 
which we could avoid. We can protect the poor, but middle and 
upper income folks should, you know, work more, save more, work 
a little bit longer.
    Mr. Crenshaw. I am out of time. Thank you, Mr. Chairman.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Massachusetts, Mr. Moulton, for 
five minutes.
    Mr. Moulton. Thank you very much Mr. Chairman. I want to 
follow up on what my colleague from Texas was saying. He was 
talking about how there are two ways to address the Social 
Security crisis. And he said specifically we can make Social 
Security solvent through tax increases or we can make Social 
Security solvent through benefits. It seems to me that what he 
meant to say was cutting benefits. Is that right, Mr. Biggs, 
Dr. Biggs?
    Dr. Biggs. You are--you would be cutting benefits certainly 
relative to promised levels. You would not necessarily be 
cutting them relative to the benefits that today's retirees 
get, because Social Security promises ever-increasing real 
levels of benefits. So it is just a distinction. It does not 
mean future retirees would have lower benefits than today. It 
is one of these Washington things: slowing the growth equals a 
cut.
    Mr. Moulton. Right. So it is a cut. It is not increasing 
benefits. What sorts of benefits do you think that we should be 
cutting to achieve solvency through this method?
    Dr. Biggs. Okay. Well, for middle and upper-income retirees 
I would slow the rate at which benefits increase. And the idea 
there is they should make up that difference, and the evidence 
suggests they will make up that difference by saving more in 
their 401(k)s, delaying retirement a little bit.
    Mr. Moulton. Saving more in their 401(k)s?
    Dr. Biggs. Correct.
    Mr. Moulton. What percentage of Americans have 401(k)s?
    Dr. Biggs. Right now, among----
    Mr. Moulton. What percentage of Americans have 401(k)s?
    Dr. Biggs. About 55 percent----
    Mr. Moulton. About 55 percent. And would you say those are 
the poorest Americans, who have 401(k)s?
    Dr. Biggs. No, those are the middle and upper-income folks 
who are----
    Mr. Moulton. Those are the upper-income folks, the middle 
and upper-income folks. Okay, but I thought Mr. Crenshaw said 
that Social Security was designed to keep people out of 
poverty. Are upper-income folks in danger of going into 
poverty?
    Dr. Biggs. No, which is why you would slow the growth of 
benefits for them.
    Mr. Moulton. But--so the point is that--you said that, by 
slowing the growth of benefits, you would encourage people to 
put more money into their 401(k)s.
    Dr. Biggs. Exactly.
    Mr. Moulton. But those aren't the people who need Social 
Security. The people who need Social Security----
    Dr. Biggs. I think you are----
    Mr. Moulton.--are the people who are at the lower income--
is that not right, Dr. Biggs?
    Dr. Biggs. Sure. You are making my case for me.
    Mr. Moulton. So----
    Dr. Biggs. We should retain benefits for the lower end, but 
slow them for middle and upper-income folks.
    Mr. Moulton. So the--so your colleague from--my colleague 
from Oklahoma stated that most Americans aren't counting on 
Social Security right now. Would you say that that is true?
    Dr. Biggs. It is a little hard to say.
    It--I wish----
    Mr. Moulton. It is a little hard to say?
    Dr. Biggs. I wish they were saving as if they were not 
going to get Social Security.
    Mr. Moulton. That is a nice wish. But are they counting on 
it? Would you like to tell my parents that they are not 
counting on Social Security?
    Mr. Biggs. I think he was referring to younger folks who 
say, ``I am more likely to see a UFO''----
    Mr. Moulton. Oh, did he specify younger folks?
    Dr. Biggs. Well, we had a previous reference to a poll of 
younger folks who said they are more likely to see a UFO than 
get Social Security, so I think he was referencing that. Yes, 
sir.
    Mr. Moulton. Okay. So we should just assume that Social 
Security won't be there.
    Dr. Biggs. No.
    Mr. Moulton. Then why don't we just eliminate it?
    Dr. Biggs. I just--in a response to a previous question I 
said that as long as Social Security is collecting 12.4 percent 
of payroll, it can continue paying benefits equal to 12.4 
percent of payroll from now until infinity. It will not run out 
of money, and it is mistaken for younger folks to think they 
will get zero. That is an error on their part.
    Mr. Moulton. That is an error. All right.
    Dr. Biggs. Sure.
    Mr. Moulton. How do you suggest that we deal with the gig 
economy vis a vis Social Security?
    Dr. Biggs. Dr. Favreault touched on this earlier. There is 
a question of people who are gig-only, who--they might work for 
Uber as their only job. And then----
    Mr. Moulton. And, by the way, if they work for Uber--I mean 
we talked about how low employment is--unemployment is right 
now. It seems to me I have met an awful lot of Americans who 
are working two or three jobs, who are just barely struggling 
to make ends meet, teachers who are driving Uber in the 
evenings to put food on the table.
    We just had a court ruling that Uber employees aren't even 
considered employees.
    Dr. Biggs. If you follow the IRS's standards for who is a 
contractor and who is an employee, I mean--you know, this is 
neither here nor there for me----
    Mr. Moulton. Well, neither here nor there for you? It is 
here or there for an awful lot of Americans who are counting--
--
    Dr. Biggs. What I am saying is----
    Mr. Moulton.--on Social Security because they are 
struggling to make ends meet, Dr. Biggs.
    Dr. Biggs. The status of Uber employees is neither here nor 
there for me. It is not the subject of my testimony, sir.
    Mr. Moulton. Well, maybe it should be.
    Dr. Biggs. Well----
    Mr. Moulton.--because we have got to figure out how to make 
Social Security--well, I am glad you think this is a laughing 
matter, Dr. Biggs.
    Dr. Biggs. I was asked to testify on retirement, not on the 
status of Uber----
    Mr. Moulton. I am not sure it is a laughing matter for an 
awful lot of Americans. I am not sure it is a laughing matter 
for that teacher who doesn't have a pension anymore, who has to 
drive Uber in the evening to put food on the table. I don't 
think that is a laughing matter at all. And I don't think the 
idea that a lot of Americans aren't counting on Social Security 
is something that we should count on here in Congress.
    Thank you, and I yield back.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from South Carolina, Mr. Timmons, for 
five minutes.
    Mr. Timmons. Thank you, Mr. Chairman. I am going to yield 
the first 60 seconds of my time to Mr. Crenshaw.
    Mr. Crenshaw. Thank you, Mr. Timmons.
    Mr. Moulton, I will help answer your question since you 
didn't want to direct it at me. I don't think this is as 
helpful to your presidential run as you might think, trying to 
twist words and mix up the numbers here.
    What we are saying is a basic notion of fairness. If you 
have to solve the problem of Social Security in a progressive 
way, which I think we actually agree on, what is the fairest 
way to do it? Do you want to increase benefits for 
millionaires? That is the essential question. And your answer 
to that is yes, you do. Some progressive. It doesn't make 
sense, and it is bad for the economy.
    That is the answer. But I know you were looking for sound 
bites for your failing presidential run. Good luck with that.
    Mr. Timmons. Thank you, Mr. Chairman.
    Dr. Biggs, so I want to begin with 1935. So the average 
life expectancy was around 60 years old, 16 people were paying 
in for every one person taking out, and the retirement age at 
that point was 65. We were coming of the Great Depression, and 
America did what America does, and that is help people that 
needed to be helped.
    Would you say that there was a retirement crisis in 1935?
    Dr. Biggs. There were very, very few retirement plans, 
either in the public or the private sector. At that point most 
retirees, those who lived to retirement age, would depend on 
families. So by today's standards there certainly would have 
been.
    Mr. Timmons. Okay, so let's fast forward to 2019. The 
retirement age is 67, average life expectancy is 80. You have 
three people paying in for every one person taking out. 
Unemployment is at a 50-year low. The economy is doing great.
    Would you say that there is a retirement crisis today?
    Dr. Biggs. There is undoubtedly not a retirement crisis 
today. Retiree incomes are the highest they have been, retiree 
wealth is the highest it has been, retiree poverty is the 
lowest it has been. You can look at surveys. You know, retirees 
will tell you they have enough money not simply to survive, but 
to live comfortably.
    It doesn't mean that we don't have cases where retirees are 
in poverty, or they have health cost problems, or other 
financial problems. But it means that, relative to the past, 
retirees today are doing very, very well. We should acknowledge 
that success and celebrate it, while still preparing for the 
challenges ahead.
    Mr. Timmons. So would you say that Social Security is not 
doing what it was designed to do in 2019?
    Dr. Biggs. Well, Social Security--if you think about the 
decline in the poverty rate among retirees, which we have seen, 
Social Security is playing a role in that, in the sense you are 
boosting benefits for folks at the low end.
    The question is, you know, is it sustainable over the long 
term? Is it focused where it should be? The issue is not that 
Social Security isn't helping prevent poverty. Is it spending a 
lot of money on a lot of higher-income people who are at no 
risk of poverty? And I think that is the question of should we 
be raising taxes to increase those benefits, or should we use 
that money elsewhere?
    Mr. Timmons. If nothing is done to change Social Security 
as it is now, will I receive benefits like my father does 
today?
    Dr. Biggs. You will receive benefits. You will not--they 
may, depending on your earnings, or as your dad--they may be a 
higher in sort of inflation-adjusted terms. You will not 
receive the benefits you have been promised. You would receive 
roughly 20 percent less than you have been promised.
    So could you survive? Probably. Is that a good system to 
have? No, it's not. And so we need to get on top of this 
problem, rather than leaving it to the night before the system 
goes broke.
    Mr. Timmons. And again, what year is--will the 20 percent 
cuts take effect?
    Dr. Biggs. It is currently projected by the Social Security 
Administration for 2035. I think the CBO projects it a little 
bit earlier than that, a year or so earlier.
    Mr. Timmons. I think we can all agree that if we send 
people 20 percent less than they received the previous year, in 
2035 it will be very bad for everyone.
    Dr. Biggs. That will be a crisis.
    Mr. Timmons. And that would indeed be a crisis. So the 
question then becomes what are we going to do that is 
responsible to fix it. And it is--will we change the plan that 
I will have, that I can expect, begin the education process to 
make sure that people in my generation understand how to 
appropriately plan for retirement, and also potentially find a 
way to increase the amount of money that is going into the 
system? So the answer is likely going to be somewhere between 
both of those approaches. Would you agree with that?
    Dr. Biggs. Sure. Americans, workers and retirees, have 
earned benefits under Social Security. We can afford to pay the 
benefits people have already earned. We can fix Social Security 
without cutting benefits you have already accrued.
    But going forward, the terms of the deal have to change. We 
have to tell people going forward, ``You are going to have to 
pay a little bit more, or get a little bit less.'' We can pay 
what people have already earned. We cannot continue an 
unsustainable deal going forward, though.
    Mr. Timmons. Thank you. Mr. Chairman, I really appreciate 
you holding this hearing today, and I look forward to working 
with you to try to fix Social Security for the next generation.
    Chairman Yarmuth. Thank you. The gentleman's time has 
expired. I now recognize the gentlelady from Minnesota, Ms. 
Omar.
    Ms. Omar. Thank you, Chairman. I would like to yield some 
time to Mr. Moulton.
    Mr. Moulton. Thank you, Ms. Omar. I just wanted to follow 
up on Dr.--Mr. Crenshaw's comments. After saying that we could 
solve the Social Security deficit through benefits, while 
conveniently leaving out the word ``cutting benefits,'' he then 
said that what I want to do is raise benefits for millionaires. 
And I assume he is referring to the fact that I support--I am a 
cosponsor of the Social Security 2100 Act that does increase 
benefits for Social Security recipients. So I just have one 
simple question.
    Dr. Favreault, are most Social Security recipients 
millionaires?
    Dr. Favreault. They certainly are not.
    Mr. Crenshaw. Thank you. And I yield back.
    Ms. Omar. Thank you. Let's continue on that thought. Social 
Security was designed to alleviate seniors--to alleviate 
seniors from poverty. Half of our nation's seniors were in 
poverty in 1935, when this happened. And right now, yes, so we 
can celebrate some wins. This is about 8.8 percent. But that 
isn't really the case for women. Do you know what the 
percentage of women is?
    Dr. Favreault. It depends which particular statistic you 
use, but usually women's poverty is substantially higher than 
men's, somewhere between 80 percent and 100 percent higher, 
depending on which statistics you use.
    Ms. Omar. Yeah, and I suppose this is twice as high as men. 
Also, women of color have higher. And what is that due to?
    Dr. Favreault. So predominantly, if you look at the 
statistics--and I cited some in my testimony--it is low 
lifetime earnings, right? We know that women face--first of 
all, African-American women, or women of color, by and large, 
will often face discrimination in the labor market.
    So, in addition to often times working less because they 
are providing care, they may be facing discrimination in labor 
markets. So that compounds over the course of a lifetime, and 
so that one can end up with lower lifetime earnings, and that 
would, in turn, lead to lower lifetime benefits. So it is a 
combination of, often times, caregiving--it can be poor labor 
market experiences. So a wide range of phenomena.
    Ms. Omar. So, I mean, we can focus on trying to fix Social 
Security. But I believe that we also can do some work in trying 
to support other policies that will get rid of this, the kind 
of disparities that exist for many of our seniors in our 
communities. So things like the Family Paid Leave Act would 
certainly be helpful.
    Are there any other policies that you think would be able 
to help fill the gap?
    Dr. Favreault. So one policy that I think is important to 
look at--and this is for people very low on the income 
spectrum--is to look at the Supplemental Security Income 
program, which I think is often referred to as the forgotten 
safety net. That is the backstop to Social Security for those 
folks who have very low incomes and very low assets. That 
program has not been updated in decades, with respect to its 
asset test.
    So that is definitely one area I would look. I think it is 
a forgotten component of our safety net, and it needs some 
modernization. So that is one idea, but certainly----
    Ms. Omar. So Dr. Biggs, I just wanted to get a clear 
understanding on the testimony, the answers you were giving to 
the questions my colleague was asking from Texas.
    You are proposing that we have the wealthiest seniors get 
less in Social Security than those that are in the lower income 
brackets?
    Dr. Biggs. Not necessarily less in dollar terms, but less 
than they are currently promised.
    Ms. Omar. Okay.
    Dr. Biggs. So they are promised some level, and I would 
have them get less.
    Ms. Omar. Right, because--what is the thought process 
around that? They have money, they shouldn't be supplemented 
more?
    Dr. Biggs. The idea is that they--if you reduce their 
future benefits, they will respond by working and saving more. 
Lower-income folks, it is much harder to do that. And so you 
should focus the benefit reductions on the folks who can most 
bear it.
    Ms. Omar. I mean that is quite progressive, I would say, 
and it is fascinating to me, because there is often hypocrisy 
from my colleague when it comes to taxation.
    I seem to think that you should tax people with higher 
income brackets, the millionaires, the billionaires higher, and 
make sure that you are putting more money back in the pockets 
of people who are struggling with poverty, or are in the lower 
income brackets.
    I also believe that we should be helping house people who 
are homeless and are struggling in our communities, that we 
should care for our children and make sure that we are 
providing for education and the such.
    And it's fascinating to me, because none of those things he 
agrees with. But when it comes to retirement and talking about 
Millennials, that is where he goes when you yourself have said, 
as Millennials, can still count on getting Social Security 
benefits. We are paying into it. We will be promised that.
    But what we are not promised is that when we take on 
student debt we will not--we are not promised to have a job 
that will be able to pay us enough to be able to pay off those 
student loans.
    We are not promised the kind of future we want in buying a 
home and starting a family and having children, having the kind 
of security and dignity that we deserve.
    We are not promised the kind of health care that is going 
to care for us when we get things like diabetes or cancer. 
Those are the kind of promises that we don't get, and those are 
the kind of promises that people cannot have the income or the 
ability to fill the gap for.
    Chairman Yarmuth. The gentlelady's time has expired.
    Ms. Omar. We cannot show up for ourselves in a different 
way. And so I just, you know----
    Mr. Womack. Mr. Chairman, her time has expired.
    Chairman Yarmuth. The----
    Ms. Omar.----we love to see that kind of hypocrisy.
    Chairman Yarmuth. The gentlelady's time has expired.
    Mr. Womack. Her time has expired.
    Ms. Omar. Thank you. I yield back.
    Chairman Yarmuth. The gentlelady's time has expired. I now 
recognize the gentleman from Georgia, Mr. Woodall, for five 
minutes.
    Mr. Woodall. Thank you, Mr. Chairman. I have missed the 
testimony. But candidly, Mrs. Cook, I came for you. I know 
where I stand on Social Security, it is the easiest and most 
predictable crisis we face. Candidly, I would pick any of the 
solutions you all proffered, rather than none of the solutions 
that you all proffered. It is a great frustration to me that we 
are here.
    I appreciate the distinction you make, Dr. Biggs, between 
providing folks with more benefits that they don't need versus 
taking more money away from them that they might need. I 
consider that a substantially different use of the federal 
power, to give people less as opposed to take more from them.
    The biggest disappointment I have had in Congress was the 
supercommittee back in 2011 that failed to make any substantial 
movement on these issues, Ms. Cook, but the second biggest 
disappointment was the pension Committee last year, a 
bipartisan, bicameral Committee. It had a real shot at being 
able to put folks who are dealing with Central States in a 
place of certainty, going forward.
    What I hear from my pensioners back home is, ``Rob, maybe I 
am going to take a haircut. Maybe it is a big haircut, maybe it 
is a little haircut. But I would rather know today so I can 
take my wife on that vacation before we get too old to do it, 
instead of not knowing.''
    I have served with these two gentlemen on the budget 
bicameral bipartisan Committee, an amazing understanding and 
productive conversation in that way. I didn't hear any of that 
coming out of the pension Committee.
    Tell me what your expectation is. If we can't agree to be 
candid with a small group like folks trusting Central States, 
how do you see us going to even a larger group, like all senior 
citizens, and being candid with them about our Social Security 
challenges going forward?
    Mrs. Cook. Congressman, do you mind if I--it was actually 
my colleague over here that talked about the Central States 
pensions.
    Mr. Woodall. I came all this way for you, Ms. Cook, and you 
are pointing me to Mr. Hanner, instead?
    Mrs. Cook. I would be happy to answer another question.
    Mr. Woodall. I was prepared to trust Ms. Cook's answer. I 
am a little more skeptical now, Mr. Hanner. Go--please.
    Mr. Hanner. Well, when you talk about dealing with them, 
and the small haircut you are talking about, you are talking 
about over 60 percent of that pension. That is not a haircut.
    Mr. Woodall. You have misunderstood what I have said. Today 
there is no certainty, except----
    Mr. Hanner. There is no certainty, you are right.
    Mr. Woodall. Except that folks cannot have the benefits 
that they have been promised.
    Mr. Hanner. Right.
    Mr. Woodall. You and I and the Chairman and the Ranking 
Member, we could create certainty.
    Mr. Hanner. Yes.
    Mr. Woodall. Now, that certainty is not going to be that 
you get everything that was promised, certainly not for the 
next generation of retirees. It is not going to be you got 
everything that the previous generation got. But what we can do 
is promise you that you are going to get something, 90 percent, 
70 percent, 60 percent, whatever it is. We can solve the 
uncertainty if we come together on that issue.
    My question, as someone who is facing that uncertainty, is 
do you value certainty at a cost more than the uncertainty, 
which, while it may not have a cost today, is certainly going 
to have an associated cost tomorrow?
    Mr. Hanner. Yes, we value certainty. We would have to look 
at the cost.
    Mr. Woodall. And that is the conversation I have with all 
my colleagues about Social Security. We should fix it. We just 
have to look and see what that ought to look like.
    And candidly, Mr. Chairman, you are the first one to take a 
serious look at what we can do to come together. It might not 
have been the look I would have taken first, but I will take a 
look over no look at all.
    Mr. Hanner?
    Mr. Hanner. But you also got to remember certainty means a 
lot to us. We paid to insure these pensions. And now you are 
telling us that is broke, too.
    Mr. Woodall. Well, to be fair, the insurance was never a 
full insurance, right? I can sign you--I can connect you with 
the folks in my district who are on pensions that were insured. 
They are not satisfied with the quality of that insurance.
    Mr. Hanner. Exactly, they are not.
    Mr. Woodall. But----
    Mr. Hanner. We were never brought into that. That was that 
was between the company and Congress.
    Mr. Woodall. They--let me ask you a different question. A 
big group in my district, UPS, as you know, paid big, big 
dollars to buy their teamsters out of Central States many years 
ago. Now folks want to come back and say, ``Well, we know you 
paid what you owed, but other folks didn't pay what they owed, 
and so now we want to come back and get some more from UPS.'' I 
think that is a fair concern on the Social Security 
perspective, as well.
    I want to solve the problem, whether it means I pay more or 
I get less, however it is, those the only levers I can pull. 
Let's pull those levers. But I want the certainty that we are 
going to do it once, we are going to agree on what that 
solution is, and now we are going to be actuarially satisfied 
for the next three generations.
    Knowing that everyone here is in favor of solutions, is 
there any upside to a temporary fix instead of a multi-
generational solve? No benefit for a short-term solution. I 
just share that with you, Mr. Chairman. Not that you advocate 
for short-term solutions, but this Congress does have a 
penchant for solving something for another 60 or 90 days. Zero 
interest across the ideological spectrum for doing something 
that is not going to be enduring. I look forward to working 
with you on an enduring solution. Thank you, Mr. Chairman.
    Chairman Yarmuth. Thank you. The gentleman's time has 
expired. I now recognize the gentleman from Nevada, Mr. 
Horsford, for five minutes.
    Mr. Horsford. Thank you very much, Mr. Chairman, for giving 
us the opportunity to address this very critical issue which 
affects millions of seniors and retirees, and one that will 
affect all of us one day.
    Before I go any further, I want to thank our primary 
witness this morning, Congressman Larson, Chairman of the 
Subcommittee on Social Security from the Ways and Means 
Committee. He recently joined me for a Social Security town 
hall in my district to speak to our constituents about the 
urgent need for Congress to act to preserve, protect, and 
improve Social Security in the future, and to strengthen all 
retirement security.
    Social Security has and continues to be a safety net for 
families across southern Nevada and across the country. Social 
Security provides benefits to 400,000 Nevada retired workers, 
of which nearly 100,000 are in Nevada's 4th congressional 
district, which I represent.
    One of the things that my constituents relate to me is they 
have serious concerns about the future of Social Security. Many 
of them expressed that they fear any cuts to their benefits, 
which they rely on to survive each and every month. And this is 
one of the reasons why I support the Social Security 2100 Act, 
which was introduced by Congressman John Larson.
    To quote Maria Dent, the state director in Nevada for AARP, 
``Nevadans earn their benefits through a lifetime of hard work. 
As a result, it ensures families against the loss of income 
caused by retirement, disability, or death. Without Social 
Security benefits about four in 10 Americans age 65 and older 
would have incomes below the poverty line, all else being 
equal, according to official estimates based on the 2017 
Current Population Survey.''
    Let me be clear. Social Security is not an entitlement. It 
is a trust fund that people have paid into their entire working 
life. It is a false choice, in my opinion, to have a discussion 
about cutting benefits for current or future beneficiaries. And 
it is time for Congress to take the responsible steps necessary 
to shore up Social Security now for current and future 
beneficiaries.
    Now, the President's proposed budget would drastically cut 
programs that benefit America's oldest, including many 
vulnerable citizens. The President's spending plan calls for 
deep reductions to Social Security disability insurance, 
breaking his promise not to touch Social Security. It also 
includes cuts in Medicare, another program he promised not to 
cut.
    According to the Federal Reserve Board, Social Security 
accounts for a greater share of retirement income for African-
American, Latino-American, and Asian-Americans than it does for 
the general population. And African-American and Latino 
retirees are about half as likely to have private retirement 
plans, and are significantly less likely to have savings 
through an IRA or a 401(k), which I suppose is the only 
solution my colleagues on the other side are willing to 
support.
    Mrs. Cook, Ms. Favreault--Dr. Favreault, and Mr. Hanner, 
can you confirm that retirement and financial security is a 
stressor for many seniors today? Yes or no?
    Dr. Favreault. Yes, absolutely.
    Mrs. Cook. Yes.
    Mr. Hanner. Yes.
    Mr. Horsford. Mrs. Cook, can you please discuss the impacts 
that any cuts to Social Security would have on the more than 15 
million elderly Americans and 130,000 Nevada residents aged 65 
and older? What would happen to benefits if trust fund reserves 
are depleted?
    Mrs. Cook. It would have a devastating effect, and we 
already see older adults in poverty. From where I--I come from 
Rochester, New York, and we have the highest percentage of 
older adults in poverty in New York state, and I have to say 
you touched upon a group of individuals who are most affected: 
women, people of color, and certainly women of color. And we 
see them barely getting by each day.
    So any cut to Social Security would throw millions, I 
believe, of older adults into poverty.
    Mr. Horsford. Yes, so disproportionately those who live on 
the brink of poverty, with nearly half of all older black and 
Latino retirees at or below the 200 percent poverty threshold.
    Mrs. Cook. That is correct.
    Mr. Horsford. These are the people we are talking about. We 
will not allow those cuts to happen, not on our watch. And it 
is time for this Congress to take the action necessary to pass 
the Social Security 2100 Act so that we can shore up Social 
Security for current and future beneficiaries.
    Thank you, Mr. Chairman. I yield back.
    Chairman Yarmuth. The gentleman's time has expired, and I 
now recognize the gentlelady from Texas, Ms. Jackson Lee, for 
five minutes.
    Ms. Jackson Lee. I thank the gentleman for yielding, and I 
thank you for holding this hearing. It is an important hearing, 
and it is a hearing that we should be committed to doing 
something about.
    One thing is certain--is that we cannot improve our fiscal 
outlook by gutting Americans' retirement security. It 
heretofore has been Social Security, savings, and pension. It 
would be immoral to try to solve our long-term budget 
challenges on the backs of retirees. Our commitment to building 
a new infrastructure--whatever the bells and whistles that we 
would like to do to make America the greatest country that it 
is, nothing should cause us to do it on the back of retirees, 
pensioners, their savings, or Social Security.
    But we have seen in this Administration a constant effort, 
a long and unbroken history of calling for cuts to Social 
Security, along with our friends, the other side of the aisle, 
and other programs vital to seniors' economic well-being.
    I have been here in the Congress when there was a rage to 
do privatization, privatization in the midst of the greatest 
financial collapse, probably worse because of the wealth in 
this country in the Great Depression--though I know that there 
will be stories to try to overcome that. What would have 
happened if we had yielded to the investment of our Social 
Security into private entities?
    I am very pleased to be one of the cosponsors of the H.R. 
2100 (sic), early cosponsor of Mr. Larson's legislation, that 
really focuses on strengthening Social Security, and also a 
sponsor of my own Social Security Dividend Safety Act that 
indicates where there is no COLA it should be a dividend given 
to senior citizens. But we hope that the legislation that Mr. 
Larson has put forward will move in this Congress, both the 
House and the Senate.
    Mrs. Cook, what would an immediate 20 percent cut to Social 
Security benefits mean to retirees? What tradeoffs and choices 
would they be forced to make?
    Mrs. Cook. Well, what I see every single day, because I 
work with older adults, they would have the devastating choice 
of paying for prescription drugs, paying for the utilities, or, 
what we see, paying for food. And earlier, one of the 
congressmen mentioned--and we see this, too--that by the end of 
the month we have to direct older adults to food kitchens and 
pantries because they can't make it right now. So I can't 
imagine they could even survive with a 20 percent cut.
    Ms. Jackson Lee. Like me, you have seen choices of cat and 
dog food being supplanted for real food. You have seen 
parceling out of medicine, not taking the right amount, which, 
obviously, we know is like not taking any at all.
    Mrs. Cook. That is right. That is right. And, you know, 
what ended up happening is many of those older adults end up in 
the hospital, paying more in just a different pocket, because 
they are not taking their adequate prescription drugs.
    Ms. Jackson Lee. Let me ask you both--all of you a 
question, starting with Mr. Hanner--about pension. My union 
friends who have worked and invested and have these pensions 
that they thought and--thought, prayed, and supported that 
would keep them through their later stages, many of them worked 
with their hands, as well as their minds, and--but they worked 
for 30, 40 years, and they worked hard.
    So, Mr. Hanner, what kinds of choices do families at risk 
of losing their pension have to face? Are people worried about 
losing their homes, or not being able to pay for their medicine 
they need, or, as many who are young pensioners worrying about 
what to do about their college-age children wanting to go to 
college, and they thought they had a nest egg and enough to 
protect themselves, could you please tell us more about how the 
widows of pensioners are hurting, as well, and how crucial it 
is to shore up pensions?
    Mr. Hanner. That is really--the key thing you have talked 
about is the worrying part. People are very worried about 
losing their homes. Their homes are probably the biggest assets 
they have. And this is their sanctuary. And when you lose your 
home, you are homeless.
    And this is probably the final straw for most people. This 
is probably the one that they couldn't take. That, yeah, they 
worry about the medical bills, the taxes, being able to look 
after the children and, you know, the stuff that they have been 
promised. You work for 35 years, and they put their part in, 
and they are expecting a return on what they have done. They 
have paid in. These are deferred wages that they are not 
getting back. And there is a big feeling that you are being 
stolen from.
    Ms. Jackson Lee. That is a good equation, if you will. You 
are equating the right kind of feeling that I would have for my 
constituents, that they are being stolen from. And they have no 
way of catching the thief.
    Mr. Hanner. And what you said about the widows, this is our 
most vulnerable section in Central States, is the widows, 
because they only get, you know, half of a pension. If together 
they had made that decision--before you retire you make that 
decision together, that whether you want survivor benefits or 
not. And you give up 15 percent of your pension if you want 
survivor benefits. And there is a lot of cases where together 
they have made the decision to forego the survivor benefits. 
So, upon death, the pension stops.
    Chairman Yarmuth. The gentlelady's time has expired. Thank 
you.
    Ms. Jackson Lee. I thank the witnesses.
    Chairman Yarmuth. I now recognize the gentlelady from 
Washington, Ms. Jayapal, for five minutes.
    Ms. Jayapal. Thank you so much, Mr. Chairman, and thank you 
all for being here on such an important topic.
    Just to your point, I always think that, you know, Social 
Security is often called an entitlement. It really should be 
called an earned benefit program, because that is what it is. 
It is not an entitlement. So thank you for that powerful 
testimony.
    In my state we know that Social Security is crucial for 
older people, as it is across the country. Without Social 
Security benefits in Washington state, an estimated 317,000 
more Washington state seniors would fall below the poverty 
line. And across the country more than 15 million older adults 
stay out of poverty because of Social Security.
    [Slide]
    Ms. Jayapal. I have a graph there that sort of shows all of 
the states--it might have come from one of you, actually--thank 
you, if someone prepared that. And Social Security benefits are 
especially important for black and Latino seniors, and for 
women, as we heard you testify, Mrs. Cook.
    We also know that Social Security would work even better if 
people with high incomes paid their fair share. And that is 
kind of what I want to focus on today. Everyone who works pays 
a percentage of their income into Social Security, but only up 
to the point of $132,900. So people who earn over $132,900 get 
special treatment. Everything that they earn over that amount 
isn't taxed anymore. They get, in my words, a special cap.
    [Slide]
    Ms. Jayapal. And so I thought about two hypothetical 
people: Dana and Donald. And I have got Dana's information 
here. And for those of you can't see the slide, I will just 
show you right here.
    So Dana lives in Seattle. And when she started working, she 
earns the Seattle per capita income, which is $51,872. Then she 
unionizes her workplace, her income goes up to the Seattle 
median, which is $79,565. And then she gets promoted, and she 
eventually earns $132,000. We are so proud of Dana. Does Dana 
pay into Social Security at the same percentage, even as her 
income changes, Dr. Favreault?
    Dr. Favreault. Yes, because she is below the cap.
    Ms. Jayapal. Correct. So she pays that same 6.2 percent 
every step of the way. All right.
    Now let's go to Donald. So now we have Donald. Donald earns 
$150,000. He works at his dad's company. Then he moves over to 
work for a for-profit university, and he--his salary goes up to 
$400,000. And then he works at a company that makes ties and 
stakes, where his pay is about $1 million a year. And again, 
this is just hypothetical. Does Donald have to pay 6.2 percent 
of his income on all of these earnings, the way that Dana does, 
Dr. Favreault?
    Dr. Favreault. No, he only pays to the cap. He only pays to 
the $132,000. So what that means--and you can see it on the 
slide--is that Donald is not paying--when he is earning 
$150,000, he is only--he is not paying taxes on 11 percent of 
that income. As he goes up to $1 million, he is not paying on 
86 percent of his income. Correct?
    Correct, okay. My hypothetical situation is right so far. 
So what that means is that Donald is paying actually .0829 
percent of his total income, versus Dana, who is paying the 6.2 
percent of her total income. Is that correct, Dr. Favreault?
    Dr. Favreault. Can't do the math on the fly, but I am going 
to trust your numbers.
    Ms. Jayapal. And anybody disagree with that 
characterization?
    Okay. So if we were to hypothetically raise the cap, or 
scrap the cap, then people would actually be paying the same 
percentage on their entirety of their income, correct?
    Okay. So, as a national expert on the economic security of 
aging adults, Dr. Favreault, how would our Social Security 
system improve if all of Donald's pay was actually taxed at the 
same rate as Dana? Donald and Dana earn money, they both do 
well, but they get taxed the same way, they pay their fair 
share. How would that change our Social Security system?
    Dr. Favreault. So if you were--if we were to immediately 
and permanently lift the cap entirely, the relative savings for 
the Social Security program, in terms of the reduction in the 
actuarial imbalance, would be between 68 and roughly 83 
percent, depending on whether you paid benefits or didn't pay 
benefits on those additional contributions.
    Ms. Jayapal. So it would have a substantial effect if you 
scrapped it entirely. But you could also raise it slightly. And 
because it is such a big system with so many people, even a 
small increase in the cap would make an enormous difference.
    So I would like to--and would women and black and Latino 
seniors who experience disproportionate poverty benefit from 
scrapping that cap?
    Dr. Favreault. So I think, in general, it is important that 
we definitely look at raising the cap for the very reason that 
then folks, particularly more vulnerable retirees, would be 
less vulnerable to benefit reductions subsequently. So yes, I 
think it is an important part of a solution.
    Ms. Jayapal. Thank you, Mr. Chairman. That is why I support 
legislation like Representative Larson's Social Security 2100 
Act.
    And I would like to ask unanimous consent to enter into the 
record this excellent report by Dr. Favreault and Owen G. Haaga 
on validating the longitudinal earnings and dynamic micro-
simulation models.
    Chairman Yarmuth. Without objection, so ordered.
    [The information follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. Jayapal. Thank you, Mr. Chairman. I yield back.
    Chairman Yarmuth. The gentlelady's time has expired. I now 
yield 10 minutes to the Ranking Member.
    Mr. Womack. I thank the Chairman. You know, we have had a 
great hearing. I am sorry that occasionally things get a little 
acrimonious in here. But, you know, this is a very important 
subject, and it has been centric on Social Security today, as I 
anticipated it would.
    But before I get into my questions I want to go to Dr. 
Biggs here for just a minute. Ms. Jayapal, my distinguished 
colleague from Washington, just threw out some hypotheticals, 
Dana and Donald. She kind of left out some important features 
of the purpose of Social Security, what it is designed to do, 
and the relationship between the percentage that is being paid 
on the income, and the benefits that accrue to the recipient at 
some point in time--62, 65, 67, whatever that timeframe is. Did 
I miss something?
    Dr. Biggs. When Franklin Roosevelt and his team during the 
Depression--when they built the Social Security program, they 
were very well aware of this kind of math. And the reason they 
put a cap on the Social Security taxes, 132,000 today, was to 
distinguish Social Security from what they then called relief, 
or what we would today call welfare. We talk about Social 
Security as an earned benefit. If you eliminate the cap, to be 
frank, whether you are paying additional benefits or you are 
not, the financing of the system becomes so redistributive--you 
have people on top paying so much more in than they could 
possibly expect to get back--that it violates what Roosevelt 
thought as people having a reasonable balance between what they 
pay and what they receive. That, in turn--people would start 
calling it welfare.
    Now me, I am personally not against the idea of a highly 
redistributive pension program to focus on the people in need. 
What we need to be aware of is that is, in fact, what you are 
doing. And Social Security--when Roosevelt's Administration 
first looked at Social Security, their original proposal, 
people with earnings above that cap wouldn't even participate 
in the program. There would be no redistribution. Their 
compromise was, well, they will be in, but they will only pay 
up to a certain amount, and they will only earn benefits on 
earnings above that amount.
    So somebody making $1 million gets no more Social Security 
benefits than somebody making one $132,000. So it is not just a 
tax. It would be--think about the program and what it is 
intended to look at on both the tax and the benefit side.
    Mr. Womack. So in Ms. Jayapal's analysis the fact that they 
pay the same amount up to 132.7, whatever that that number is, 
the proportionate amount that they would accrue in terms of 
benefits is basically tied to the amount that they are paying 
in.
    Dr. Biggs. Exactly.
    Mr. Womack. And that--so under her scenario, if we were to 
lift that cap, then what would happen to the accrued benefit of 
the high-income earner? And what would that do to the concept 
of Social Security? I think you have kind of answered that, but 
I want to give you another chance.
    Dr. Biggs. Well, this gets the idea we had earlier of are 
we favoring paying higher benefits to, you know, millionaires 
and billionaires. And if you want to keep Social Security as an 
earned benefit, an earnings-related system, if you eliminate 
that cap you have to pay additional benefits. You will be 
paying higher benefits to those folks.
    The question is how do they view it. Do they think it 
becomes welfare, or do they--does it weaken support for the 
system? And one of the things Roosevelt thought, and which most 
people, I think--still continues to be true is because it is 
not seen as a welfare program, it is seen as an earned benefit. 
Social Security has survived and had political resiliency in 
ways that other programs that are seen as welfare don't.
    So I think it is important to keep that balance. I mean we 
can adjust it, but it is to be--to recognize that it is not 
just a no-brainer that people should pay 12.4 percent of all 
their earnings. Roosevelt was a smart guy, and he didn't think 
you should do that.
    Ms. Jayapal. Would the Ranking Member----
    Mr. Womack. I would be happy to yield, yes, ma'am.
    Ms. Jayapal. This is a good line of questioning, and I 
appreciate it. I was just curious whether, when the program was 
established, whether you think there is any merit to the 
question of what that cap should be. And in those days I don't 
think we had a lot of millionaires and billionaires in the same 
extent that we do today. The wealth inequality today is--hasn't 
been the same since 1920.
    So I just am curious for--I mean, if the Ranking Member 
permits, for anybody's thoughts on this, because we are in a 
vastly different economy today, where you could argue that our 
taxation system and many other factors have created this 
tremendous inequality.
    And so I appreciate the Ranking Member's questioning. I am 
just curious whether there are other factors that you might 
want to consider as you look at this cap, given the dramatic 
difference between today and when it was established.
    Dr. Biggs. When Social Security began, I believe the 
payroll tax ceiling was set so that around--Melissa may know; 
correct me if I am wrong, but--sorry, Dr. Favreault--I think 
around 90 percent of total earnings were subject to Social 
Security payroll taxes. It is now--today it is about 84, 85 
percent. So a common proposal is let's lift the cap to cover 90 
percent again. That might take it to, I don't know, 185, maybe 
$200,000. But they understood. I mean in the 1920s, 1930s there 
was a lot of income inequality, and they got it.
    But it is just thinking about, you know, how you want to 
balance this, and how it is perceived. But it is also--if you 
think there are other uses for federal money, you know, if you 
want to do Medicare for all, if you want to have more money for 
infrastructure, once you eliminate that Social Security tax 
cap--as I joked earlier, but it is, in fact, true--you would be 
at Scandinavian levels of taxation. Top tax rates, my guess, 
including state taxes, would come in around 62 percent.
    Ms. Jayapal. But it is important to understand----
    Dr. Biggs. You are not going to get much----
    Ms. Jayapal.--who is paying that increase.
    Dr. Biggs. Sure.
    Ms. Jayapal. The increase goes to a----
    Dr. Biggs. Yes.
    Ms. Jayapal.----very tiny, tiny, tiny portion, depending on 
how you structure it.
    Mr. Womack. I have been very generous with my time.
    Ms. Jayapal. You have, and I thank you, Mr. Ranking Member.
    Mr. Womack. I am going to reclaim my time, and I know the 
Ranking Member, him being the great guy from the Commonwealth 
of Kentucky that he is, will give me another minute if I need 
it.
    Look, I want to carry this conversation back to the idea of 
Social Security and its origin, and what it was designed to do, 
and how far away from that, particularly with a lot of very 
vulnerable seniors today that we have gotten from that, that it 
is the only source of income for a large number of people.
    Dr. Favreault, why is that? Why do so many people have only 
Social Security as their income?
    Dr. Favreault. So I think a big component of this is low 
lifetime earnings, right? There are a lot of people who just 
aren't able to accrue a lot of earnings over the course of 
their lifetime. It can be for a variety of reasons.
    Mr. Womack. And I am a big fan of asking the question why. 
In fact, when I talk to young people today I challenge them to 
ask why. So why have people been destined to a lifetime of low 
earnings?
    Dr. Favreault. So often it can be a lack of investment in 
education. But often there is just, you know, a distribution of 
skills across the population. So I think the more we invest in 
education, certainly, the more likely people will have higher 
lifetime earnings.
    Also, you know, things happen to people, of course. 
Disability happens, caregiving happens. And we know partly 
women's low lifetime earnings tend to be much lower than men's 
lifetime earnings, by and large, because they are taking care 
of kids, they are taking care of the grandparents when they get 
sick. So there is definitely a lot of reasons why we understand 
low lifetime earnings.
    As I mentioned earlier there is the issues of 
discrimination in the labor market, and those are things that I 
think are really important that we need to consider, as well.
    Mr. Womack. And some of those things we have been able to 
address over time, and so we have been able to fix some issues. 
But we still have an alarming number of people, I think, that 
are relying only on Social Security as their primary source of 
income when they hit retirement age. And I believe that that is 
contributing to the problem. And you are right, some bad things 
happen to good people, you know, health-related issues and 
those kinds of things.
    But we also have a lot of people that are making some very 
poor decisions with their lives, be it things like drugs and 
alcohol or, you know, matters, you know, that involve criminal 
conduct. We have people that are making terrible health-related 
decisions that are contributing to a higher cost to living 
later on in life. And so, I mean, I just think there is a 
cacophony of reasons why we have people that are reliant on 
Social Security.
    I want to go back to Dr. Biggs, because earlier in the 
hearing--and a number of my colleagues were not here to hear 
this--you made a--you discussed how you would be handling this 
issue with regard to the higher-income people and the lower-
income people, and you were specific about wanting to do a 
better job of handling the people on the low economic spectrum, 
as opposed to the distribution of benefits throughout.
    Dr. Biggs. If I could generalize, the difference between 
sort of conservative Social Security reform plans and 
progressive reform plans isn't in how they treat low-income 
people. Some of the provisions to boost benefits for low 
earners that are contained in Social Security 2100 Act came 
from conservative plans authored by Republicans. The issue 
isn't how you treat the poor.
    The issue is do we want to raise taxes on middle and 
higher-income people in order to pay higher benefits to middle 
and higher-income people, or do we want to hold the line on 
their taxes and tell them, ``You are going to save more on your 
own and work longer.'' I would bet my life, if you were to put 
this question to people and say, ``Would you rather pay more 
money into Social Security to get higher benefits, or would you 
rather pay more money into your 401(k) or IRA to get more money 
from that,'' vast majorities would rather save that money on 
their own.
    So the point here is not do we betray the people at the 
bottom. We have an obligation for them. That is what Social 
Security was created for. But it was not created to be paying 
$40,000 a year to somebody who made 130 every year of his life. 
It is just--it is--we need to refocus our resources.
    Mr. Womack. Yes. And as I conclude, Mr. Chairman, I would 
just say this. So much of what we have facing our country 
involves the education of people. And I believe we are not 
doing as good a job as we could, particularly in some of our 
educational institutions, of helping young people understand 
that they are not going to be 18 or 19 years of age forever. 
There is going to be a day that their hair is going to be the 
color of mine, or maybe even gone.
    The fact is if we all expect to live a long life, and we 
want to live a long life, but at some point in time we are not 
going to be work-eligible any more, and we are going to have to 
retire. And so to think that they would be able to hit those 
ages and only have Social Security and be able to live a 
comfortable lifestyle, I think, is--would be a 
misrepresentation of reality.
    So I appreciate the hearing. We got a lot of work to do, 
and there is some things that we can do on a--and it is going 
to have to be bipartisan if it is going to be successful. And I 
hope to be engaged in those conversations. I thank you, and I 
yield back.
    Chairman Yarmuth. I thank the Ranking Member. I now yield 
myself 10 minutes for questions.
    You know, I am--this relates a little bit to what the 
Ranking Member was just saying. But several years ago my 
pollster was telling me that when she polled voters as to their 
top issue, the issues that they were most concerned about, most 
pollsters, she said, don't put retirement security in the poll. 
They put jobs and the economy, they put so forth and so on--
health care. But she said, ``When I put retirement security in 
the poll, it always polls number one.''
    And she said, interestingly, it polls most strongly with 
younger voters. And it is not because they don't think that 
they are ever going to get the benefits, it is because they 
don't want their parents moving in with them, which was, I 
thought, quite an interesting perspective.
    But this clearly is an extremely important topic, not just 
because I am now well into past 65, but because we--it is a 
national challenge, and it is an ongoing challenge for our 
fiscal health, as I said earlier.
    We have had some difference of opinion, I think, between 
Dr. Biggs and others about how much retirement security there 
is in the country, and that--as Dr. Biggs contended, there is--
assets and contributions are higher than ever, and he cited 
that as evidence that most people are secure.
    But total and average assets and contributions can grow, 
even if most Americans are not well prepared for retirement. 
The wealthiest Americans may be skewing those distributions.
    Do you think that the income inequality that we have been 
talking about is playing a role in skewing these statistics, 
and having disparities in retirement security, Dr. Favreault?
    Dr. Favreault. Yes, I think it is absolutely critical when 
we look at these sort of statistics that we look not just at 
the mean, but also at the full distribution. Because--and this 
goes back to the issue of the cap, and why less earnings are 
now being covered by Social Security, is the fact that we have 
had so much explosion at the very top of the earnings 
distribution, and I think it is really important, and we need 
to take a look at that. That does skew the statistics. So it is 
really valuable to look at medians, quintiles, the whole 
distribution.
    Chairman Yarmuth. Thank you.
    Dr. Biggs, several years ago we did something very 
important with Social Security. We corrected what I considered 
to have been a terrible mistake in Social Security, and that 
was that it allowed beneficiaries to defer their retirement, or 
their--taking their benefits to age 70, and they got an 8 
percent a year bonus for that. And it occurred to me--and I am 
not benefiting from that, by the way--it occurred to me that 
that was exactly the wrong incentive, because the only people 
who can afford to do that are the people who don't need the 
bonus, the only people who could afford to retire and not take 
their benefits for four more years.
    We have a system now that allows you to retire earlier. Are 
there--I mean to take your benefits before you are actually 
eligible for retirement. Do you think that causes problems in 
any respect? I haven't thought through that, but I would like 
to know.
    Dr. Biggs. Thanks. If I could first just touch on the issue 
of, you know, using averages, and whether that skews things. I 
know that came up earlier in the hearing.
    I cited recent Federal Reserve research, which came out a 
couple months ago, finding that the shift from defined benefit 
pensions to traditional pensions to 401(k)s has not appreciably 
changed the distribution of retirement wealth or retirement 
savings. It has increased retirement savings. The level of 
savings has increased. The distribution of it hasn't really 
changed very much.
    So this is a case where I am not trying to skew with 
averages. I mean, the rich always do save more, partly because 
they are rich, but partly because they get a lower replacement 
rate from Social Security. But if you have got a higher level 
of savings today, which we do, with a similar distribution of 
savings to what we had in the past, that in fact means the low 
and middle-class people are better off in terms of their 
savings than they were under traditional pensions.
    Similarly, when I cited the Census Bureau research showing 
a significant decline in poverty among over-65 Americans over 
the last 20 years--about one-third, almost one-third decline in 
the share--in poverty--that is not from millionaires and 
billionaires getting richer. That is from poor people having 
higher incomes.
    So it is--I would really encourage people to look at the 
numbers and the data in my testimony. I am not saying there are 
not problems, but it is--those problems are much, much more 
isolated than people think. We are doing a lot of things right.
    Thinking on the retirement age, I am not against the 
delayed retirement credit for older--you know, people who work 
past 65 or 67. I mean, you may be right, in terms of some 
present value sense it compensates them. Where I think we may 
have made an error in the past was lowering the Social Security 
retirement age from 65 to 62.
    If you go back to the 1940s, 1950s, when we had people 
working on farms, factories, mines, the average person didn't 
claim benefits to past 65. If you go back to 1950, I think the 
average Social Security retirement age was 68. So the idea that 
we can't work longer is belied by the fact that we, in fact, 
did work longer. Once we lowered that 65 to 62, so many people 
claimed it. There is research that came out last year showing 
because so many more people claimed those early reduced 
benefits, that increased poverty in retirement by a significant 
amount.
    So I know it is hard to say to people, ``You have to work a 
little bit longer,'' but giving them early benefits with that 
big cut, I think, has been harmful to a lot of folks. So it is 
a tough choice, but I think, on balance, it didn't work out.
    Chairman Yarmuth. Does anybody--any of the other witnesses 
have a perspective on that?
    Yes, Dr. Favreault?
    Dr. Favreault. I would just add, though, I think with 
respect to Dr. Biggs's point on the EEA, that we do see that 
there are significant numbers of people who lose their jobs in 
their fifties. A lot of shocks happen in your fifties, in your 
sixties. So there are a lot of people who are extremely 
vulnerable when they are approaching the cap.
    My colleague, Richard Johnson, recently did a study and he 
saw something on the order of roughly 50 percent of people 
can--are likely to experience a layoff in their fifties. And 
the overwhelming majority of them, when they are re-employed, 
they are re-employed at lower wages. So a lot of things happen 
late career, and not--you know, I think it is important to keep 
the early eligibility age as a safety valve.
    Chairman Yarmuth. Is there any data that anyone is aware of 
about what percentage of people who elect to take benefits at 
62 are doing it because they are out of work or because they 
chose to?
    Dr. Biggs. I can't think of data off the top of my head, 
but there has been a lot of research looking at what causes 
people to retire early, things like job loss, things like 
health problems are the most predominant ones. Even amidst that 
group, though, I don't think that job loss and health issues--I 
don't think that explains the majority of people who retire 
early.
    If you look at early retirees in Census data, the Current 
Population Survey, most of them, even people like aged 60 years 
old, before the early retirement age who consider themselves 
retired, they were asked, ``Do you want--would you take a job 
if it were available?'' The vast majority say no.
    And so I think you do have probably a lot of retired public 
employees, but still it is trying to figure out that end of 
things, it is not just job loss and health. There are a lot of 
people who are voluntarily just choosing to retire early.
    Chairman Yarmuth. Right. They have a sufficient----
    Dr. Biggs. Yes.
    Chairman Yarmuth. They either have a generous enough 
pension, they have the savings, they have the opportunity----
    Dr. Biggs. In their judgment, they do, yes.
    Chairman Yarmuth. Right. Well, I am not going to belabor 
the hearing. You all have been very patient with your time and 
with the questions. And it has been over, well, two hours 20--
40 minutes, so I am going to conclude now, and just advise all 
the members that they can submit written questions to be 
answered later in writing.
    Those questions and your answers will be made part of the 
formal hearing record. Any members who wish to submit questions 
for the record may do so within seven days.
    Once again, I thank all of the witnesses. And without 
objection, this hearing is adjourned.
    [Whereupon, at 12:41 p.m., the Committee was adjourned.]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]