[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                     SOCIAL SECURITY FUNDAMENTALS: 
                        A FACT-BASED FOUNDATION

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

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 OF THE

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION
                               __________

                             APRIL 26, 2023
                               __________

                           Serial No. 118-13

         Printed for the use of the Committee on Ways and Means
         

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                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
53-013                    WASHINGTON : 2024  


                      COMMITTEE ON WAYS AND MEANS

                    JASON SMITH, Missouri, Chairman
VERN BUCHANAN, Florida               RICHARD E. NEAL, Massachusetts
ADRIAN SMITH, Nebraska               LLOYD DOGGETT, Texas
MIKE KELLY, Pennsylvania             MIKE THOMPSON, California
DAVID SCHWEIKERT, Arizona            JOHN B. LARSON, Connecticut
DARIN LaHOOD, Illinois               EARL BLUMENAUER, Oregon
BRAD WENSTRUP, Ohio                  BILL PASCRELL, Jr., New Jersey
JODEY ARRINGTON, Texas               DANNY DAVIS, Illinois
DREW FERGUSON, Georgia               LINDA SANCHEZ, California
RON ESTES, Kansas                    BRIAN HIGGINS, New York
LLOYD SMUCKER, Pennsylvania          TERRI SEWELL, Alabama
KEVIN HERN, Oklahoma                 SUZAN DelBENE, Washington
CAROL MILLER, West Virginia          JUDY CHU, California
GREG MURPHY, North Carolina          GWEN MOORE, Wisconsin
DAVID KUSTOFF, Tennessee             DAN KILDEE, Michigan
BRIAN FITZPATRICK, Pennsylvania      DON BEYER, Virginia
GREG STEUBE, Florida                 DWIGHT EVANS, Pennsylvania
CLAUDIA TENNEY, New York             BRAD SCHNEIDER, Illinois
MICHELLE FISCHBACH, Minnesota        JIMMY PANETTA, California
BLAKE MOORE, Utah
MICHELLE STEEL, California
BETH VAN DUYNE, Texas
RANDY FEENSTRA, Iowa
NICOLE MALLIOTAKIS, New York
MIKE CAREY, Ohio
                       Mark Roman, Staff Director
                 Brandon Casey, Minority Chief Counsel
                              ----------                              

                    SUBCOMMITTEE ON SOCIAL SECURITY

                    DREW FERGUSON, Georgia, Chairman
MIKE CAREY, Ohio                     JOHN LARSON, Connecticut
DAVID SCHWEIKERT, Arizona            BILL PASCRELL, New Jersey
RON ESTES, Kansas                    LINDA SANCHEZ, California
BLAKE MOORE, Utah                    BRIAN HIGGINS, New York
RANDY FEENSTRA, Iowa                 DAN KILDEE, Michigan
GREG STEUBE, Florida
DAVID KUSTOFF, Tennessee

                         C  O  N  T  E  N  T  S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Hon. Drew Ferguson, a Representative from Georgia, Chairman......     1
Hon. John Larson, a Representative from Connecticut, Ranking 
  Member.........................................................     2
Advisory of April 26, 2023 announcing the hearing................     V

                               WITNESSES

Barry Huston, Analyst Social Policy, Congressional Research 
  Service........................................................   126
Stephen Goss, Chief Actuary, Social Security Administration......   139
Phillip Swagel, Ph.D, Director, Congressional Budget Office......   151

                           PUBLIC SUBMISSIONS

Public Submissions...............................................   217

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                     SOCIAL SECURITY FUNDAMENTALS: 
                        A FACT-BASED FOUNDATION

                              ----------                              


                       WEDNESDAY, APRIL 26, 2023

                  House of Representatives,
                   Subcommittee on Social Security,
                               Committee on Ways and Means,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:05 a.m., in 
Room 1100 Longworth House Office Building, Hon. Drew Ferguson, 
[chairman of the subcommittee] presiding.
    Chairman FERGUSON. The meeting will come to order.
    Good morning, everyone, and thank you for being here today.
    It is my privilege as the chairman of the Social Security 
Subcommittee to welcome everyone to our first hearing.
    I would like to thank Ranking Member Larson, Chairman 
Smith, and the other members of the Social Security 
Subcommittee for being here today. I would also like to thank 
Mr. Smucker for joining as a guest of the subcommittee and I 
think we may have a couple of other people that may join as 
well. We will recognize those as they come in.
    Also I want to express our continued support and prayers 
and thoughts for our colleague, Mr. Kildee, who is still 
recovering from surgery. We look forward to his return as he is 
a valuable member of this subcommittee as well.
    I am excited to begin the work of this subcommittee in this 
Congress to get to a point where we actually solve one of the 
tougher challenges that Americans are facing, and that is the 
solvency of Social Security, making sure that our seniors, 
those that are in retirement and those that are near 
retirement, receive the benefit that they have certainly earned 
and deserved.
    I think that there are a lot of times over the past decade, 
it has been my observation that Social Security is used more as 
a political tool in many ways, and what we hope to do with this 
subcommittee is to remove the politics from what we are doing 
and actually find real bipartisan solutions to this.
    There is a number of ideas that have been floated around 
out there, but today's hearing is about making sure that we all 
start at the same spot. My colleague, Mr. Larson, you have done 
a tremendous amount of work in this space, and we look forward 
to debating many of the ideas that you have spoken about in the 
past.
    But we also hope to come up with many new ideas in a 
collaborative fashion. I think there are a couple of things 
that I want to constantly talk about and I want us to be aware 
of.
    Number one, I want us to be intellectually honest about our 
conversations. In order to do that, we must have a thorough 
understanding of where we are in the timelines, and to make 
sure that we understand from our witnesses today, the facts and 
the numbers. I think that is important.
    The other thing that I think is really important is to 
understand both from a Republican and a Democrat standpoint 
that there are going to be many ideas floated out by many 
different groups. There are going to be different entities 
within each conference that are going to float ideas out there.
    That does not mean that is where this committee will go. I 
think that this committee has the opportunity, number one, to 
work together in a bipartisan way because we ultimately believe 
that the solution to Social Security and the insolvency and to 
making sure that the beneficiaries receive their benefits will, 
in fact, be a bipartisan solution.
    It is the only way forward and we look forward to working 
with our colleagues to reach that.
    As we go through this discussion today, today is about 
understanding where we are. Today is about making sure that we 
are on solid footing as a subcommittee. It is about 
understanding the history of Social Security, when it started, 
how it started, and how we got from there to where we are now 
because there is a lot that has happened.
    And I think if we do that, and we reach a common ground on 
our understanding, then we will be able to take steps forward 
together.
    So with that, I thank you all for being here.
    Chairman FERGUSON. And I would like to recognize the 
gentleman from Connecticut for an opening statement.
    Mr. Larson, you are now recognized.
    Mr. LARSON. Well, thank you, Mr. Chairman, and I especially 
appreciate the esprit de corps that you have started the 
committee hearings with, and I also am delighted that Chairman 
Smith is here as well.
    I want to compliment him as well for taking time to both be 
here and also meet with members individually. I think that 
bodes well for an opportunity for us, as you stated, to be 
about solutions.
    And I think that is what Social Security is all about. What 
we are dealing with here quite frankly is congressional 
neglect, or better stated, congressional malpractice. In terms 
of especially the committee of cognizance, in this case, Ways 
and Means not having adjusted Social Security and certainly 
enhanced any of its benefits in more than 52 years, 52 years.
    A lot has changed since then, and people will recall what 
happened 40 years ago with President Reagan and Bob Dole and 
Tip O'Neill, and that did provide additional solvency by making 
cuts into the future, last of which took place just last 
January in 2022, where now the age for Social Security is 67.
    I do appreciate also, as well, Mr. Chairman, your focus on 
let's cut to the chase and get to the facts, and then get to 
probably the most important thing that we can do and where 
Congress is negligent: voting. And that is both parties, 
Democrat and Republican, but it is long overdue.
    For everyone today we want to pass out the cards, and if I 
could show, because of our guest of honor here today, we took 
the liberty of, if you will look over my shoulder.
    But every individual is going to receive a card because, 
Mr. Chairman, you are right. This is about the numbers, and 
those numbers though are more than numbers. They are people.
    And on average, every one of our districts has 145,000 
Social Security recipients, some more than others, and many on 
this committee have some of the highest numbers in the entire 
country.
    And that is why it is vitally important that we know those 
numbers as well because at the end of the day, it is 
beneficiaries and people.
    And in our discussions, Mr. Chairman, I appreciate your 
commitment to doing other hearings as it relates to 
beneficiaries and, as you pointed out, to the solutions.
    Let's be clear. We have legislation. We have proposals. We 
think it is long overdue and these need to be with the Congress 
and the committee being a place where the vitality of ideas is 
exchanged.
    This is the opportunity to do it. We want to lay out those 
plans side by each. The venerated Sam Johnson had a great plan, 
but it was never put forward and never taken to a public 
hearing. It should have been.
    The Republican Study Committee has come out with proposals 
as well.
    Now, I appreciate, and we clearly take everybody at their 
word in terms of saying, ``Listen. We are no longer interested 
in holding Social Security or Medicare hostage.'' That is not 
going to be the case.
    That is, however, if you will forgive our skepticism, not 
what the Republican Study Committee says in their report, and I 
would like to submit that for the record.
    But, again, taking the chairman at his word in wanting to 
make sure that we get to the vital statistics with 10,000 Baby 
Boomers a day becoming eligible for Social Security. There is 
no more important thing that we can do.
    Within the next two years, there will be more than 70 
million fellow Americans relying on Social Security, five 
million already in terms of statistics who get below poverty 
level checks.
    Social Security is the number one anti-poverty program for 
the elderly. It is the number one anti-poverty program for 
children, and more veterans rely on it than they do the VA for 
disability.
    Congress needs to act. We are the committee of cognizance. 
We need to act on behalf of the people we are sworn to serve.
    Mr. Chairman, I thank you for holding this hearing and look 
forward to the future hearings on beneficiaries as well.
    Chairman FERGUSON. Thank you, Mr. Larson.
    Without objection, the RSC report you mentioned will be 
entered into the record, without objection.
    [The information follows:]

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    Chairman FERGUSON. Now, I am pleased to recognize the 
distinguished chairman of the Ways and Means Committee, my 
colleague from Missouri, Mr. Smith.
    Mr. Smith, you are recognized.
    Chairman SMITH. Thank you, Chairman Ferguson, Ranking 
Member Larson.
    This is an extremely important hearing, one that, as you 
pointed out, Mr. Larson, 189,000 of my folks are affected by 
Social Security, including my momma. And you have got to make 
Mom happy or no one is happy.
    So I appreciate that we have this conversation and that we 
are here.
    You know, Social Security is vital to the retirement 
foundation of millions of Americans. Preserving this program 
for future generations as well as benefits for current retirees 
is one of the most important issues that we must address in 
this committee.
    And we must do so together, absent political gamesmanship. 
The American people, they deserve that. An issue of this 
importance can only be accomplished if both sides agree to work 
together to find reasonable solutions to strengthen the 
program's long-term finances.
    This challenge is not getting easier. In the most recent 
Social Security Trustees report, the date the retirement Trust 
Fund hits insolvency moved up one year earlier.
    Today's rising interest rates and the worst inflation in 40 
years is contributing to this challenge. Last year, higher 
inflation resulted in an 8.7 percent cost-of-living adjustment, 
Social Security's highest since 1981.
    This was not a windfall for seniors. It was needed to keep 
up with prices. Unfortunately, that high COLA has also resulted 
in many lower income seniors paying taxes on their benefits for 
the first time.
    Perhaps this is an issue this committee could also further 
examine. Social Security pays cash benefits to over 65 million 
people each month, the majority of whom are retired workers. 
Millions of retirees already face tough choices on how to 
afford their day-to-day expenses, their medications and food.
    We owe it to every working family, to today's seniors and 
tomorrow's retirees, to make sure that this program is working 
properly and it is strengthened.
    Like many Americans, my own mother is one of those 65 
million on Social Security. For her and the many other 
Americans relying on their benefit check, promises made should 
be promised kept.
    I applaud the work of the Social Security Subcommittee 
today to not avoid this conversation, but to instead lead the 
way on setting a fact-based, bipartisan foundation for future 
discussion. Agreeing on a common set of facts is the first of 
many steps to working together to find a path forward to 
protect and strengthen these programs.
    I yield back, Mr. Chairman.
    Chairman FERGUSON. Thank you, Mr. Chairman. And, again, we 
are grateful for your presence here at the hearing.
    I want to acknowledge that I have heard Chairman Smith say 
on many, many occasions the things that we must do on this 
subcommittee are to, number one, make sure that we are united 
in the facts, and make sure that our first goal is to always 
protect the benefits of the people that have earned those 
benefits and paid into the system.
    I thank you for your leadership on that, Mr. Chairman.
    Now I will introduce our witnesses. First, Barry Huston is 
an Analyst of Social Policy at the Congressional Research 
Service.
    Thank you for being here, Mr. Huston. I look forward to 
your testimony.
    Stephen Goss, the Chief Actuary of the Social Security 
Administration, again, thank you for your willingness to be 
here.
    And Phillip Swagel, maybe the busiest man in D.C. over the 
last 48 hours, Director of the Congressional Budget Office.
    Mr. Huston, your written statement will be made part of the 
record. You are now recognized for five minutes, sir.
    Thank you.

      STATEMENT OF BARRY HUSTON, ANALYST, SOCIAL POLICY, 
                 CONGRESSIONAL RESEARCH SERVICE

    Mr. HUSTON. Chairmen Smith and Ferguson, Ranking Member 
Larson, and members of the subcommittee, thank you for inviting 
me to testify on Social Security fundamentals, a fact-based 
approach.
    My name is Barry Huston, and I am an Analyst in Social 
Policy for the Congressional Research Service.
    Social Security is a Federal social insurance program that 
protects workers and their families against a loss of income 
due to old age, death, or disability. Workers become insured 
for benefits by working in covered employment and earning wages 
subject to the Social Security payroll tax.
    In 2023, the program will cover about 94 percent of the 
workforce and will pay benefits to over 66 million 
beneficiaries.
    Although Social Security's original purpose providing 
economic security for older workers remains, the program 
experienced by Americans today is different from the one that 
was created in 1935. Originally, the program covered about 56 
percent of the workforce, and benefits were payable only to 
retired workers age 65 and older.
    Benefits were based on a worker's total cumulative wages 
and there was no mechanism to automatically adjust benefits for 
changes in wages or prices. Absent future legislation, retirees 
would receive the same amount of benefits for the rest of their 
lives.
    The next three decades saw expansion of the program. In 
1939, lawmakers changed the focus of the program from single 
workers to families by extending benefits to certain dependent 
family members of insured workers.
    Congress also revised the benefit formula to increase 
benefit levels for most workers and to compute benefits based 
on average monthly wages.
    In 1950s, Congress expanded coverage to more groups of 
workers, provided ad hoc benefit increases, created disability 
benefits, and allowed for early retirement.
    In 1972, Congress passed legislation that made three major 
changes to the program. First, it provided an ad hoc benefit 
increase.
    Second, to preserve the purchasing power of benefits, it 
provided for automatic cost-of-living adjustments, or COLAs.
    Third, to finance the automatic COLAs, it established 
automatic increases in the annual amount of earnings, subject 
to the Social Security payroll tax.
    In the mid-1970s, the program experienced significant 
financial difficulties when economic conditions caused 
financial imbalance and program costs began to exceed its 
revenues. To address these challenges, Congress passed a series 
of measures aimed at mitigating program costs and increasing 
revenues.
    In 1977, Congress revised the benefit formula for new 
groups of retirees to stabilize the replacement rate of pre-
retirement earnings. This revision created the current law 
benefit formula by establishing a formula that indexes workers' 
initial benefits to wage growth and future benefits to price 
growth.
    The legislation also provided for increases in payroll tax 
revenues.
    Economic conditions after the 1977 legislation put further 
pressure on the program. In 1981, President Reagan established 
the bipartisan National Commission on Social Security Reform, 
or the Greenspan Commission.
    In the same month, Congress passed legislation that allowed 
for the Retired Worker Program to temporarily borrow from 
certain other funds. This borrowing authority was exercised in 
late 1982 and gave lawmakers a short, six-month window to 
address the financial imbalance of the program before the 
system would be unable to pay full scheduled benefits on time.
    In 1983, the final report of the Greenspan Commission 
provided recommendations to eliminate about two-thirds of the 
projected financial shortfall. All of the recommendations were 
included in future House and Senate bills.
    Key provisions were to include newly hired Federal 
employees in the program; tax a portion of Social Security 
benefits; delay the 1983 COLA; and accelerate scheduled 
increases in the payroll tax rate.
    A House amendment to gradually increase the full retirement 
age from 65 to 67 was also included in the final legislation to 
eliminate the remaining financial shortfall.
    This legislation, the Social Security Amendments of 1983, 
are generally considered the last major reform to the program. 
With the legislation, the program's average projected cost and 
revenue rates were relatively close over the long-term, 75-year 
period.
    That said, the end of that 75-year period remained a 
projected imbalance. Over time, as the program advanced toward 
the end of this period, it has moved further out of actuarial 
balance.
    Thank you, and I look forward to your questions.
    [The statement of Mr. Huston follows:]

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    Chairman FERGUSON. Thank you, Mr. Huston.
    Mr. Goss, you are now recognized.

   STATEMENT OF STEPHEN GOSS, CHIEF ACTUARY, SOCIAL SECURITY 
                         ADMINISTRATION

    Mr. GOSS. Thank you very much, Chairman Ferguson, Ranking 
Member Larson, Chairman Smith, and members of the committee.
    Thanks for the opportunity to come and speak to you today 
about Social Security, past, present, and future, and thanks to 
Barry for covering the history.
    Social Security started paying monthly benefits in 1940, 
and the 84 years through 2023, all scheduled benefits have been 
paid in full and on time, thanks to timely congressional action 
when needed, based on the annual Trustees reports, which have 
been produced each year starting 1941.
    We are approaching another time for action. Under the 
intermediate assumption of the 2023 Trustees report released 
last month, combined research of the OASI and DI Trust Funds 
are projected to become depleted in 2034, at which time 80 
percent of scheduled benefits would still be payable.
    The OASI Trust Fund alone is projected to deplete reserves 
in 2033 if no action is taken, with 77 percent of scheduled 
benefits then payable.
    While both of these dates are one year earlier than 
projected in last year's report, we note that the year for the 
combined trust fund reserve depletion has been projected to be 
between 2033 and 2035 for the last 12 years. We have simply 
been getting closer to that date.
    In order to avert reserve depletion and an ability to pay 
benefits on time in 2034, we need legislation to raise future 
scheduled revenue for the program by about a third or to reduce 
scheduled benefits by about a fourth or to agree on a mix with 
some portion of each of these changes.
    We are committed to work with you, as in the past, in 
developing and assessing the implication of potential changes 
to meet this goal.
    So why are we facing this challenge? Many things have 
changed since the 1983 amendments were enacted, with 
expectation of combined trust fund reserve depletion then being 
extended to around 2060.
    Growth in average earnings for the top six percent of 
earners outpaced that for lower earners between 1983 and 2000, 
reducing the share of all covered earnings subject to the 
payroll tax from 90 percent down to about 82 and a half percent 
at that time.
    This lowered payroll tax revenue to the trust funds by over 
eight percent, and this was not expected in 1983.
    In addition, average real wage growth has been slower than 
had been assumed by the trustees back in 1983. It was then 
assumed to be about 1.44 percent in the ultimate period.
    However, the changing age distribution of the population 
was understood at the time, with birth rates already reduced 
after the year 1965, at the end of the Baby Boom period, and 
life expectancy at age 65 was then projected in 1983 to rise to 
19.1 years by 2015, a level that actually was realized.
    The COVID-19 pandemic and the ensuing recession of 2020 
have had tremendous effects on all of our lives. The recession 
was fortunately short-lived and recovery in GDP and employment 
was remarkably swift and complete.
    Some elevation in prices was about matched by elevation in 
wage levels to this point, having relatively small effects on 
the OASI actuarial status. The number of beneficiaries has not 
increased as in past recessions due to continued high demand 
for workers in the economy, the unfortunate loss of over 1.1 
million of our population, largely older individuals, and 
reduced levels of applicants for retired worker and disabled 
worker benefits.
    The projected shortfall of revenue for the program compared 
to the cost of providing current law scheduled benefits over 
the next 75 years or the unfunded obligation amounts to a 
seemly large $22.4 trillion in present discounted value over 
this period as a whole.
    But this is much better understood to represent 1.2 percent 
of GDP over the period.
    We note that this shortfall does not contribute to any 
increase in Federal debt for the future as the Social Security 
Program has no borrowing authority and can only expend the 
current and past accumulated revenue that has been dedicated to 
the program.
    So our challenge is to find a solution that will eliminate 
the shortfall, providing the future level of retirement 
survivor and disability income desired by our population at a 
cost we are willing and able to pay.
    Again, we look forward to working with you, Chairman 
Ferguson, Chairman Smith, Ranking Member Larson, and all of the 
members of the committee and very much look forward to 
questions and comments you will be having.
    Thank you very much, again.
    [The statement of Mr. Goss follows:]

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    Chairman FERGUSON. Thank you, Mr. Goss.
    Dr. Swagel, you are now recognized.

  STATEMENT OF PHILLIP SWAGEL, PH.D., DIRECTOR, CONGRESSIONAL 
                         BUDGET OFFICE

    Mr. SWAGEL. Thank you. Thank you, Chairman Ferguson, 
Ranking Member Larson, and Chairman Smith, and members of the 
subcommittee. Thank you for inviting me to testify about the 
Social Security Program.
    And it is a pleasure to be here with my distinguished 
colleagues who have contributed so much to the analysis of the 
system.
    As the others have said, Social Security faces a 
significant financial challenge in the coming decade. Its two 
components, the old age and survivor's insurance and the 
disability insurance, are financed by revenues from payroll 
taxes and income taxes on benefits. Those are credited to 
separate trust funds.
    In our projections the OASI Trust Fund is exhausted in 
fiscal year 2032, and the disability trust fund is exhausted in 
2050. If the two trust funds were combined, they would be 
exhausted in fiscal year 2033.
    Economic growth is a key source of uncertainty in these 
projections. If the economy grew faster than projected, annual 
revenues would be greater and the trust funds would be 
exhausted later than projected, or the opposite if growth were 
slower than projected.
    Now, by statute, our baseline projections for Social 
Security are required to reflect scheduled benefits. We 
projected if Social Security benefits were paid as scheduled, 
the program's actuarial deficit over the next 75 years would 
equal 5.2 percent of taxable payroll, or equal to 1.8 percent 
of GDP.
    In other words, trust fund balances would be sufficient to 
pay scheduled benefits through 2097, through the 75-year 
horizon, if payroll tax rates were increased immediately and 
permanently by 5.2 percentage points.
    Now, that does not include the impact of those higher taxes 
on the economy. So there would be some negative effects of 
those, but setting those aside, so doing a static or 
conventional estimate, an increase in the payroll tax rate from 
12.4 percent to 17.6 percent would equal a relative rise in the 
tax of 42 percent.
    So alternatively, a corresponding reduction in benefits of 
38 percent would be sufficient to pay scheduled benefits. And, 
of course, a combination of changes in taxes and benefits could 
also suffice.
    Now, a challenge is that those changes would be good for 75 
years but would not ensure Social Security's sustainability 
after 2097, and the challenge is that doing the changes I 
mentioned, raise the higher taxes permanently, immediately and 
permanently or the lower benefits immediately and permanently, 
would create annual surpluses over the next 25 years, but then 
there would be growing annual deficits after that, and that is 
why it does not give you sustainable solvency.
    You know, under current law Social Security outlays are 
limited to amounts payable from the annual revenues, and after 
a trust fund's exhaustion, the Social Security Administration 
would no longer be able to pay full benefits when they are due. 
The payable benefits of the OASI side would be about 25 percent 
smaller than scheduled starting in 2032.
    Now, we project about 78 million people, roughly one-fifth 
of the population, would receive those benefits in 2032. So 
that is the number of people who would be affected, and the 
impacts of these lower benefits in 2032 within the budget 
window would affect those households with lower lifetime 
incomes more heavily than households with higher lifetime 
incomes.
    Now, our long-term projections for Social Security are 
based on a detailed microsimulation that examines data about 
the individuals from a representative sample of the population. 
We project economic and different graphic outcomes over time. 
The projections we use in our Social Security model are the 
same projections that we use in the budget.
    So, in our ten-year budget numbers, our 30-year budget, 
long-term budget, Social Security, everything is the same. 
There is consistency for our estimation of legislation on 
anything.
    Population growth is determined by demographic factors, by 
birth, death, net immigration. In our projections, we have 
fertility rates remaining lower than the rate required for a 
generation to replace itself, and so even though we have 
mortality rates declining, the share of the population who are 
working is declining relative to those who are receiving 
benefits.
    So thank you very much. I look forward to working with the 
subcommittee as you address Social Security finances, and I am 
happy to take any questions.
    [The statement of Dr. Swagel follows:]

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    Chairman FERGUSON. Thank you, Dr. Swagel.
    And to each of our witnesses, we will now begin the 
question-and-answer session of this hearing, and I will start 
this.
    Mr. Huston, when the retirement program was first 
established, about how many months of benefits, on average, did 
the beneficiary receive?
    Mr. HUSTON. As originally enacted in 1935, the Social 
Security Act made benefits payable only to retired workers age 
65 and older. The average life expectancy at that time was 
about 12 years for men and 14 years for women.
    This would correspond to about 144 months for men and 168 
months of benefits for women, on average.
    Chairman FERGUSON. So how does that compare to where we are 
today?
    And maybe, Mr. Goss, I mean, if you want, either one of you 
all who would like to answer that would be helpful.
    Mr. HUSTON. I will say quickly our average life expectancy 
has increased since 1935. Using the 2023 projections from the 
actuaries, the average life expectancy at age 67, which is the 
new full retirement age, for men is about 18 years, on average, 
and 20 years for women. This would correspond to about 216 and 
240 months of benefits, respectively.
    Chairman FERGUSON. Okay. All right. Thank you.
    Dr. Swagel, the average person retiring today, kind of walk 
through what their average benefit is going to look like today, 
and what does that look like compared to, say, 20 years ago?
    Or actually, let's go back to, say, the early 1980s, the 
last time we had this crisis that we are feeling now.
    Mr. SWAGEL. Thank you, Mr. Chairman.
    A feature of the system is that benefits are indexed to 
wages. So as the economy expands and workers today have higher 
incomes, the benefits are adjusted upward.
    The initial benefits are adjusted upward, and then benefits 
keep pace with inflation.
    So the average monthly benefits for retirees today are 
about $1,900, $1,911. We project that to rise up to $2,700 in 
2033.
    So benefits are rising, and similarly, that has risen over 
the comparison with the past as well.
    Chairman FERGUSON. And that is reflected in some of, I am 
assuming, both of your projections about when the trust fund or 
when benefits potentially there would be a shortfall there. 
Part of it is just not only the demographics, but also the fact 
that, you know, the benefit will continue to go up and a 
combination of you have got people living longer and receiving 
a greater benefit, which is a great thing, obviously. It is a 
great thing.
    So another question. Mr. Huston, if you could, if you could 
talk a little bit about the fact that for the eighth 
consecutive report, it was released without public Trustees. 
And explain how the Advisory Board is different than the 
Trustees and the impact that that potentially has.
    Mr. HUSTON. Excuse me. Public Trustees, as you may know, 
are nominated by the President and confirmed by the Senate, and 
they must be from different parties.
    One of the recommendations that was made in the Greenspan 
Commission that was included in the 1983 legislation, that was 
the last time there were major reforms.
    One of the reasons they were included, the congressional 
intent for that inclusion was to take a hard look at the 
assumptions that were made in the projections moving forward.
    Part of the reason was coming out of the 1977 legislation. 
We thought there was about 50 years of solvency, and Congress 
had to return and address the situation in the early 1980s.
    So, the inclusion of public Trustees in the reports was 
something that Congress intended to help avoid coming back and 
having to deal with the situation again.
    Since 2015 or I should say 2015 was the last Trustees 
report that included public Trustees, and those positions have 
been vacant since.
    Also, there is the Social Security Advisory Board that was 
created in 1983. The boards consist of seven members in 
staggered six-year terms. Three members from different parties 
are appointed by the President and confirmed by the Senate, and 
four members are appointed by the Speaker of the House and 
Senate pro tem with consultation to Chairmen of the Committee 
of Ways and Means and Senate Finance.
    One of the main congressional intents for creation of the 
Advisory Board is, I think, in this context is to make 
recommendations to the President and Congress on policies to 
ensure solvency.
    Chairman FERGUSON. Quick question. Has that been an 
effective tool in your opinion?
    Mr. HUSTON. I do not think I should actually answer that 
question, sir. I think that is more of a question that you 
could answer.
    Chairman FERGUSON. Very good. One final question for the 
panel. Dr. Swagel, CBO has a role to play here. The actuaries 
have a role to play here. The one thing that you all have 
gotten pretty close on is the date where things head South.
    But there are also differences between each of your 
projections. Again, one of the goals of this subcommittee is to 
understand the numbers. Can you briefly talk about the 
differences that may exist between CBO's numbers and the 
actuary numbers?
    And how should we as members of this subcommittee view that 
difference?
    Mr. SWAGEL. Okay. No, thank you.
    I mean, I think the big picture is, as you said, the system 
has financial challenges in the near term with the exhaustion 
date, within the ten-year budget window and in the long term, 
right, the long-term solvency of the system.
    So that is the big picture, and it seems that our 
calculations are similar. We differ in two fundamental ways. 
One is the modeling technology. We have a different approach to 
modeling as usually with economists, on the one hand, and 
actuaries, on the other hand.
    They are both valid modeling technologies. They have 
advantages and disadvantages.
    And then we have differences on the projections. I was 
about to say data, but it is really projections because we are 
looking at 75 years. It is really hard to know, and so 
differences in fertility, the demographics for fertility, 
immigration, retirements can matter.
    What also matters is the economics. So we have a lower 
interest rate than the Trustees. That makes a really big 
difference because, you know, we both have deficits in the 
system out into the future. A higher interest rate discounts 
those deficits.
    So, we see the size of the hole as deeper, in part, because 
of differences like that, that we have a lower long-term 
interest rate than they do.
    And so, Mr. Chairman, again, the big picture though is 
overwhelmingly the same.
    Chairman FERGUSON. Thank you, Dr. Swagel.
    Yes, very briefly, and then we are going to move to other 
members.
    Mr. GOSS. Yes, thank you very much, Chairman, for the 
opportunity to also speak.
    Yes, there are some differences between the Trustees' 
projections and CBO's projections. We are very similar now in 
terms of the near term for the year of Trust Fund reserve 
depletion.
    Over the longer term, there are some differences, but you 
might want to refer back to there was a committee hearing on 
2016, I believe, where I and the then Director of the CBO put 
forth where we were on our assumptions and where we had been 
over the historical period.
    I think our projections are borne out very well, as I 
mentioned earlier in the oral testimony that, for instance, our 
projection of life expectancy increase since 1983 has actually 
has been spot on.
    There are clear differences of opinion about what real wage 
growth and real interest rates might be in the future, but the 
trustees stand by where we are at this point.
    And there is some difference in the long term, but that is 
a long way off, but the main question really is the reserve 
depletion, and I think CBO is now within the three-year window 
that we have been at for the last 12 years.
    Chairman FERGUSON. Okay. Thank you for that.
    Next, I will recognize the ranking member, the gentleman 
from Connecticut, Mr. Larson.
    You are recognized.
    Mr. LARSON. Thank you, Mr. Chairman.
    First and foremost, let me thank all the panelists, for 
your professionalism. Having served on this committee for a 
while, it gives me great pride to say how circumspect you are 
especially in putting forward the facts because of your 
nonpartisanship and even resisting opportunities when they 
present themselves, but always being professional. That is a 
credit to the congressional process as well.
    Martin Luther King coined the phrase ``the fierce urgency 
of now.'' And, again, let me applaud the chairman because that 
is what is so important about this meeting, and that is what is 
so important about getting the facts.
    And here are the facts. The facts are we are in the worst 
global pandemic that we have witnessed since the world's 
creation.
    We also find ourselves in a situation where we are dealing 
with inflation, and the fierce urgency of now impacts people 
over the age of 65 more than any other group. Of the 1.1 
million who have perished in this country because of this 
pandemic, over 834,000 are over the age of 65, and people over 
the age of 65 are the ones who tend to be on fixed incomes.
    And people on fixed incomes are the ones that are most 
ravaged by inflation.
    And the congressional negligence that has taken place, 
there had been nothing done to enhance the benefits of the 
Nation's number one anti-poverty program, Social Security, 
anti-poverty program for the elderly. Without Social Security 
more than 40 percent of our current elderly population would be 
living below the poverty level.
    Yet Congress still does not act or vote.
    Social Security, as the chairman knows and people on this 
committee also, is the number one anti-poverty program for 
children, and especially the child tax credit and its need to 
come back and be put in effect, but childcare, spousal care, 
and more veterans rely on Social Security disability.
    More than 300 in 50 separate groups have come out, and John 
Fitzgerald Kennedy back in 1963 designated the month of May as 
the month that we should pay attention to our elders. He was 
not around long enough to see that transpire, but President 
Johnson put that into effect.
    It is important for a number of reasons that we put this 
information out there. We do have legislation on our side to 
put out there, and it should endure the test of public hearings 
and, like all ideas, should be debated side by each.
    We are waiting to see the legislation from the other side, 
and what is so encouraging about this is the desire of both the 
chairman and the chairman of this subcommittee to get to a 
solution.
    I dare say that the solution is something that is going to 
require not just protecting Social Security but enhancing it. 
Ten thousand Baby Boomers a day become eligible. Over the 
course of a year that is 3,650,000 new Social Security 
recipients.
    A lot has changed since 1971. A lot has changed even since 
1983, but what has not changed is Congress' inability to take 
action. This is not anything the President of the United States 
can do through executive order or that the Supreme Court is 
going to act on. It is going to take Congress and this 
committee to do what it is elected by its constituents to do, 
and that is vote.
    I commend the chairman for starting and saying we need 
facts, and part of those facts is the human infrastructure, the 
very beneficiaries that we need to hear from, and what they are 
going through and what they are enduring.
    They are your mother and father, your brothers and sisters. 
They are your churchgoers. They are your neighbors. This is 
what we are talking about.
    This is America's number one insurance plan. This is the 
number one committee to deal with it.
    I yield back.
    Chairman FERGUSON. Thank you, Mr. Larson.
    Mr. Schweikert, you are now recognized for five minutes.
    Mr. SCHWEIKERT. Thank you, Mr. Chairman.
    And look. This is one of those subjects I find fascinating. 
I wish we did it more academically. I mean, at some point the 
math is going to win. The math always wins.
    The only thing I am going to say that is close to being 
partisan because you know I love you, but I sat there puckered 
up when the President was doing the State of the Union. I 
thought he was going to say we need to come together and work 
on this, and we sort of made it even harder to work on because 
we sort of turned the discussion about shortfalls in Social 
Security and Medicare into a campaign issue.
    And we, the folks who are seeing the real math, we need to 
drag our brothers and sisters back to being willing to have the 
morality of this discussion.
    Mr. Swagel or Dr. Swagel, I am going to start with this and 
work backwards. We were doing a back-of-the-napkin calculation 
months ago, and we hit exhaustion. The 23 percent cut is what 
the actuaries have given us.
    The next check out the door, we were calculating that 
senior poverty basically doubles in America. Is that a rational 
calculation?
    Mr. SWAGEL. I mean, and that is the challenge of the system 
within the budget window, that doing nothing means the negative 
effects and we have a 25 percent shortfall. They have 23. It is 
very similar. The negative effects are the same.
    And as I said in my oral statement, the impacts are the 
most salient on low income families.
    Mr. SCHWEIKERT. Mr. Goss, go ahead and comment on that 
because I had warned him I was going to ask this question. So 
please, am I within the ballpark?
    Mr. GOSS. I think you are likely in the ballpark.
    The one thing to keep in mind though is that we have never 
in the history of Social Security reached a point for reserve--
--
    Mr. SCHWEIKERT. I am not asking the theoretical. I am just 
saying if the math hit is this, because I am trying to make the 
moral argument why we all have to do something.
    Mr. GOSS. But there is this issue. We do not have 
experience with what would happen if we hit reserve depletion, 
what would happen to benefits.
    One theory is that the Commissioner would be required to 
reduce benefits across the board for all recipients by 23 
percent. That is not necessarily the case. Benefits could be 
delayed a month or they could be trimmed to only be reduced for 
the highest----
    Mr. SCHWEIKERT. That is interesting.
    Mr. GOSS. There are options. There is nothing in the law 
that indicates the way in which benefits----
    Mr. SCHWEIKERT. But there is nothing in the law I think 
that gives the Commissioner that type of flexibility, is there?
    Mr. GOSS. Pardon?
    Mr. SCHWEIKERT. We will come back to that.
    Mr. HUSTON----
    Mr. GOSS. The law is not specific on how benefit 
expenditures would be reduced. It is just we would have to pay 
only 77 percent of----
    Mr. SCHWEIKERT. Yes, you can only pay what you have.
    Mr. GOSS [continuing]. One way or the other.
    Mr. SCHWEIKERT. Mr. Huston, if one of the things that we 
keep talking about, long-run actuarial accuracy, but if we go 
back 50 years, huge variance. Now, I do not know how much of 
that is fertility, income growth, population changes.
    What do you think were the triggers why the earlier 
actuaries, we were so far off?
    Mr. HUSTON. Just to clarify, are you talking about coming 
out of the 1977 amendment?
    Mr. SCHWEIKERT. Out of 1977, and I know that is a long time 
ago.
    Mr. HUSTON. Sure, sure. So right after the 1977 amendments, 
and I think it is important to note that they never eliminated 
all of the long-range actuarial balance, but they did think it 
accomplished getting everything solvent for about 50 years.
    Part of the reason the midterm that 25 to 50-year mark was 
in good condition is we knew that there was going to be the 
Baby Boomers entering the workforce. That would be met with 
higher payroll tax revenues and the system would be good.
    What happened right after 1977 is the near-term income and 
cost rates were very close, and it turns out that the economic 
experience of the late 1970s was not nearly as robust as we had 
hoped for after the legislation.
    There were two COLAs back to back in the late 1970s that 
were approximately ten percent or more, and there was 
decreasing wage growth as well. So, this led to a combination 
of higher than expect cost.
    Mr. SCHWEIKERT. I have seen a paper that talked about the 
effects of those COLAs at that time and that inflationary cycle 
and how much they just made an impact.
    And forgive me. It is the tyranny of the clock.
    Mr. Swagel, okay. So, CBO says 25 percent reduction in 
functionally nine years. What do you think is the biggest 
driver of the difference between you and the actuaries over 
here?
    Is it fertility? Is it income growth? What drives that 
variance?
    And I know we are being nitpicky, but I am trying to get my 
head around when I give speeches saying is it nine months, is 
it ten years or--excuse me--nine years, ten years.
    Mr. SWAGEL. Yes. So I mean, it is a number thing, and there 
is near term and long term. Long term the demographics and the 
interest rate are key.
    Mr. SCHWEIKERT. But the window to----
    Mr. SWAGEL. And near term, it is a bit of fertility. It is 
really near term economic growth. I think we have different 
inflation and different growth, and you know, that drives the 
difference.
    Mr. SCHWEIKERT. Mr. Chairman, thank you for your patience.
    One of the back-of-the-napkin math and I think we used a 
different discount rate, but we did a 75-year actuarial 
shortfall, and it was like $202 trillion at the end of the 75 
years, shortfall without changes in the system.
    Maybe I used too aggressive of a discount rate, but it 
gives you an idea of the scale.
    And with that, I yield back, Mr. Chairman.
    Chairman FERGUSON. Thank you.
    If the chairman could take a moment here.
    Mr. Goss, you said something a few minutes ago to this 
point about, your all's projections if you go back 20 years, 30 
years to where you thought we would be. You said that they were 
spot on or pretty close to it there.
    Can you provide that? Would you provide that to the 
committee to go back and show that in 1985 or 1990 or 1995, 
that where your projections were and where we are today?
    I think that would be helpful for the committee to see that 
in some very simple forms. So if you would do that.
    Mr. GOSS. We actually have an actuarial note. We update 
every year to indicate the changes in the Trustees' projections 
from 1983 all the way up to date. So we actually have that, and 
I think it is number nine referring note.
    If I may make one other comment though about the 1977 
situation, the real problem that we had was the 1972 
amendments. Actually, we were working on benefit tables. Barry 
might have mentioned this earlier, that when high inflation 
came along, we ended up having what was oftentimes then 
referred to as double indexing, both the CPI and the wage rates 
combined. They added to give extra large increases, and that is 
what brought us to the problem, which is why we had to have the 
1977 amendments to really fundamentally change the nature of 
the benefit formula.
    I was really from inflation of the type that we had in the 
late 1970s and early 1980s had not been anticipated by anybody, 
and when it came, it was a real problem for the program at the 
time
    Chairman FERGUSON. Thank you.
    Next, I will call on the distinguished member from New 
Jersey, Mr. Pascrell.
    You are recognized for five minutes.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    Social Security, I think, we can all agree is one of 
America's greatest achievements. For 80 years, Social Security 
has protected countless widows, families, seniors. It promised 
that no family falls into abject poverty because of a 
disability or retirement and expected death.
    So Social Security has kept the American Dream within sight 
for generations of families, and we know there are a lot of 
families who subsist on Social Security alone, more and more 
each year.
    So, this is a great achievement. It is a promise. So, we 
had better get it right, whatever changes we are going to have.
    Now, each of you brings very special qualities to the 
panel. Mr. Huston, you are from West Point.
    Mr. HUSTON. Yes, sir.
    Mr. PASCRELL. What more could we ask for? You have done 
your job. You have done it well, and you have a special 
interest in disability insurance. You have a background in 
that.
    Most Americans and most congressmen do not quite understand 
what that is.
    Mr. Goss, you are a Chief Actuary. We know your history, 
and you bring so much to this panel.
    As Mr. Swagel, you are an economist. You have had that 
background for many, many years.
    I listened to the three of you, and I would say if I were a 
traffic controller, that you are holding a pattern. You are in 
the holding stage. You do not want to say anything this way; 
you do not want to say anything that way.
    And that is where we were five years ago, ten years ago. So 
both the chair and the ranking member, I believe, are on 
target.
    So there are nearly 70 million Americans who receive these 
benefits that were just talked about every year. In my State, 
there are 1,200,000 New Jerseyans who receive Social Security 
every month totaling $211 million.
    Social Security is this sacred promise with every working 
American, and yet there are those people--read this back here. 
This guy is a Senator over on the other side, and you all shook 
your head when I was saying these nice things about Social 
Security.
    Ron Johnson, an astute member of the Senate, said this on 
April 21st, 2023. ``Social Security is a Ponzi scheme.''
    Now, look. We both cannot be right, impossible. A Ponzi 
scheme. I am happy to defend that comment all day long.
    So this is what we are contending with. This is why we are 
in a holding pattern, and if we deny it, we will have another 
holding pattern in another five years, and you have seen it 
all, Mr. Goss.
    Continue your holding pattern. You are doing the right 
thing.
    Republicans try to mask the plans in dry language. Their 
plans are clear. The Study Committee's new scheme would deny 
disabled beneficiaries Medicare. I mean this is either true or 
it is not true, my brother. They want to deny disabled 
beneficiaries Medicare for another 12 months, beyond the 
already excruciating two-year wait.
    So, I hear that all the time from my neighbors who suffer 
from the current two-year period, and I fought and I will 
continue to fight. That is easy. That is the easy part of this, 
to end the waiting period, and, Mr. Chairman, my time is up. 
So, I yield back to you, sir.
    Chairman FERGUSON. Thank you, my friend.
    And, Mr. Pascrell, two things I can tell you with 
certainty. Okay. Number one is a Senator from Wisconsin will 
not be taking a vote on this subcommittee. Okay.
    And what one member of another body says about their 
thoughts on Social Security is not reflective of what we are 
trying to do here.
    So, I can promise you that Mr. Johnson will not be allowed 
to take a vote on our subcommittee, which is great news.
    As I said before, too, there are going to be plans that 
come out from multiple sides. The Republican Study Committee, 
Tuesday Group, House Freedom Caucus, just to name a few on our 
side. Progressive Caucus on your side.
    Again, this committee----
    Mr. PASCRELL. What about the Progressive Caucus?
    Chairman FERGUSON. They may offer a plan on Social Security 
as well.
    Mr. PASCRELL. I am not a member of the Progressive Caucus.
    Chairman FERGUSON. My point is that I want to continue this 
hearing really focused on the numbers and getting it right, 
getting our knowledge right, and I want this committee to 
remove itself from the politics so that we can focus on the 
solutions.
    And I do appreciate that, and with that, we will now move 
to the gentleman from Utah, Mr. Moore.
    You are now recognized for five minutes.
    Mr. MOORE of Utah. Thank you, Chairman Ferguson.
    And I will echo, all I have seen since I have entered this 
committee has been three incredible months. We work on the most 
important issues.
    Thank you for being here to talk substantly about these. 
All I have seen from my leadership on this committee is a 
sincere intent to address Social Security in the best way for 
our populations.
    And to the ranking member, as you have graciously done some 
research to find out all of us, what we are, it only confirms 
what I have been telling people. Utah is the youngest State in 
the Nation, and I love representing that group of people, and 
it kind of goes into my next question when I talk about 
fertility rates.
    So please, no more jokes about Utah at this point on the 
fertility rate, but we have got an issue. In 2007, Director 
Swagel, as the fertility rate drops after 2007-ish time frame, 
can you share with us how that impacts the sustainability of 
Social Security, given the financing of the structure?
    Mr. SWAGEL. Yes. No, thank you. And it is a key challenge 
for the system, which is the declining fertility rate because 
it affects the ratio of people paying into the system against 
the people drawing benefits.
    And we have seen that after the financial crisis of 2008. 
The fertility rate dropped, and it did not rise. In the 
intervening time, the fertility rate has stayed low.
    Now, part of it is a social good. There are fewer teens 
having babies. So it is a social good. It is a challenge for 
the system, and we are talking about the dollars, but I do not 
want to say it is a bad thing.
    In our projections, we have fertility rising somewhat 
because our view is that the decline in fertility that we saw, 
again, during the pandemic will be somewhat reversed as births, 
in essence, are delayed, that women will have, you know, births 
in their 20s and into their 30s rather than as teens or early 
20s.
    So there is some of that, but there is still a financial 
system because of the declining fertility.
    Mr. MOORE of Utah. Absolutely, and it gets to the ratios, 
Mr. Huston, that you have discussed with respect to the 
beneficiary ratio from worker to beneficiary.
    Would you add anything to that assessment?
    Mr. HUSTON. I think at the time in 1935, the worker-to-
benefit ratio was much higher than it is today obviously, and 
that has been decreasing over time. So that is leading to an 
imbalance in the number of workers paying into the system 
versus the number of beneficiaries, which are people collecting 
from the system.
    The further that moves into imbalance puts additional 
pressure on the program.
    Mr. MOORE of Utah. Thank you.
    Mr. Goss, since statistics have highlighted that the 
insolvency, Social Security Trust Fund insolvency could even 
come a year earlier, and we are seeing a lot of that due to the 
reduced levels of GDP, labor productivity over that production 
period.
    Can you describe why we now expect lower labor productivity 
levels and how declining workforce participation may exacerbate 
this issue?
    Mr. GOSS. Yes, thank you very much.
    The Trustees did do a reassessment for this year's Trustees 
report, suggesting the possibility that the level of labor 
productivity in GDP might be lower in 2023 because of an 
economic slowdown and remain lower through the balance of the 
75-year projection period.
    There is a little bit of good news though, and that is 
that, oh, and by the way CBO actually projected an even lower 
growth rate in aggregate GDP in 2023 than the Trustees did, 
both below one percent.
    The good news is that most private forecasters are now 
projecting this experience late in 2022, and so far in 2023, we 
will be exceeding that and doing better. So it is really not 
clear.
    There is a lot of uncertainty in these areas, but I might 
just mention also in terms of the fertility rate, the fertility 
rate in a given year has really no impact on the financing of 
the Social Security Trust Fund or its benefits for about 20 
years out. That is how long it takes for births to move into 
the population.
    So the other thing, too, just to be very clear on birth 
rates is since 2008, we have had a low birth rate. Of course, 
after 1965, we had a low birth rate until 1990 when the birth 
rate came back up above 2.0 for 1990 through 2008.
    There is something demographers refer to as temple effect, 
women deciding to have children at higher ages. That is still 
going on to a degree.
    Now, the Trustees project that we will have an increase 
back to about 2.0. Birth expectation surveys of what women say 
they want to have and plan to have is still over two, and our 
projection is for that, however, not to be realized until 2056, 
a long time out.
    Mr. MOORE of Utah. And again, Utah is probably doing their 
part there, but you actually emphasize the point if it takes 20 
years to take that in consideration, labor participation is so 
much more important, and that is such a key aspect to being 
sure that we do this.
    We have got to come up with innovative solutions, making 
sure we get a positive, productive workforce back into our 
economy.
    And I will just close with on sort of the bipartisan effort 
to really consider how we act. We have got to come and work on 
together and do something as we approach this calamity up 
ahead, and I know that our team is committed to that.
    So thank you, and my time has expired.
    Chairman FERGUSON. Thank you, Mr. Moore.
    Next the distinguished lady from California, Ms. Sanchez, 
is recognized.
    Ms. SANCHEZ. Thank you, Mr. Chairman. And thank you to 
Ranking Member Larson.
    Today we are here to discuss the impact that Social 
Security has for people throughout the country, and to look for 
some commonsense solutions to try to preserve and protect that 
benefit.
    Social Security was designed to ensure that people who work 
their lives could have the opportunity to retire with dignity 
and some sense of financial security, and it is an earned 
benefit because people pay into the system over the course of 
their lifetime.
    It has been over 50 years since Congress has passed 
meaningful legislation to update this landmark piece of 
legislation. Unfortunately, here at today's hearings there is 
not one Social Security recipient who is here to testify as to 
the benefits of that program.
    This is, in my opinion, a way for my colleagues on the 
other side of the aisle to look for, quote, unquote, new ways 
to slash these earned benefits by raising the retirement age 
and privatizing the program.
    The Republican Study Committee's most recent budget intends 
to cut Social Security benefits by $729 billion, $729 billion 
in the first ten years. The Republican plan would also raise 
the retirement age to 70 years old, reduce benefits for 
everyone earning more than $60,000 a year, and privatize Social 
Security.
    When you see the reaction in France to raising the 
retirement age to 65, it is overwhelmingly unpopular, and to 
consider raising it to age 70, I think, is a little excessive.
    So I really want to urge everyone who is watching this 
hearing to take a look at that plan and see for themselves how 
Republicans plan to cut Social Security. I do not want folks to 
be mistaken because we have seen the same proposals time and 
time again. They are like reheated leftovers that keep making 
their way to the table.
    During the Bush Administration, Republicans proposed 
similar reforms, and the American people flat out rejected 
them, and since then Republicans have continued to try to cut 
these hard-earned benefits from working class families.
    In my district, there are more than 116,000 seniors who 
depend on this program just to survive, not to live some lavish 
retirement lifestyle but just to survive. Many of those folks 
are Latino seniors who depend on their Social Security benefits 
as their primary source of income in retirement age.
    And without that benefit, that Social Security benefit, 47 
percent of Latino seniors would live in poverty, the highest of 
any demographic group in this country.
    Social Security is remarkably popular because Americans 
know that it is guaranteed and that they can count on it when 
they need it. Since Ida May Fuller received the first ever 
Social Security check in 1940, the program has never missed a 
payment.
    Today under the guise of modernizing Social Security, what 
my colleagues on the other side of the aisle really are 
proposing is slashing benefits in a really unconscionable 
amount, raising the retirement age and privatizing the program, 
and that is just not acceptable.
    My colleagues on the other side of the aisle are going to 
claim that Social Security is financially unsustainable, and 
that Democrats need to come to the table to work to modernize 
the program, and I do agree that Democrats and Republicans both 
need to come to the table to find common sense solutions.
    But a common-sense solution is not slashing the program to 
the point that people are left to fend for themselves in their 
golden years.
    So-called modernization that pushes current and future 
seniors past the breaking point is not the answer. Instead, I 
am going to urge my Republican colleagues to come to the table 
and talk about increasing Social Security benefits by improving 
the cost-of-living adjustment formula to better reflect 
inflation, to protect widows and widowers from financial 
distress after losing a loved one and addressing the program's 
solvency.
    And I would add that Mr. Larson has a really great bill 
that I think would be a great point of reference for 
Republicans to see that we can hold on to those values, that if 
people worked hard their entire lives and put into the system, 
they should be able to receive the benefit when they retire.
    And with that I yield back the balance of my time.
    Chairman FERGUSON. Thank you.
    And to our witnesses, again, I want to thank you for being 
here today, not to mask any other plan, but to just simply 
present the facts and make sure that members of this 
subcommittee are fully educated on exactly where we are in this 
process.
    Next, I am going to call on the gentleman from Tennessee, 
Mr. Kustoff.
    Mr. KUSTOFF. Thank you, Mr. Chairman. Thank you for calling 
today's hearing, and thank you to the witnesses for appearing.
    Mr. Goss, if I could with you first, in your written 
testimony in the conclusions you talk about the DI Trust Fund 
and essentially how it stabilized and you have seen an 
improvement. What do you attribute that to?
    Do you attribute that to lower unemployment, better 
participation in the workforce, the state of the economy or a 
combination thereof?
    Mr. GOSS. I think you are right on target--thank you--with 
all of the above. We have seen a dramatic drop in disability 
incidence rates and numbers of people receiving benefits since 
2010 from the Great Recession, down to levels that are very, 
very low now, much lower than have been average in the past.
    We were expecting by about 2026, some years ago, to have 
about ten million recipients for Social Security disabled 
worker benefits. We are now projecting it to rise back up to 
about eight million, and it is below that now.
    So, the experience in disability has been really, really 
very positive. Applications and number of people starting 
benefits have been much lower. We believe that this is likely 
due to the changing nature of work in our economy.
    It is also, very importantly, probably related to the fact 
of the changing age distribution of our population. When Baby 
Boomers first entered the workforce, some might recall or have 
heard about there was a large surge of young people coming into 
the workforce.
    Early out retirements were offered to people in their 50s 
and 60s by private companies. We are now seeing the opposite. 
With the relative dearth of young people coming into the 
workforce, there is now a demand for labor for people to work 
longer and to accommodate individuals who have some limitations 
to continue and work.
    So there have been some very, very positive effects in 
terms of employment. By the way, speaking of employment, 
employment has been strong. I was just commenting that we 
should be careful about looking at labor force participation 
rates because labor force is not only the people who are 
working that we can count, but also people who in a survey 
might say, ``I am actively seeking employment''.
    The way people hear that question changes from time to 
time. So the unemployment rate is a little bit tricky, but the 
number of people actually employed has rebounded from the most 
recent recession to levels similar to 2019 and is continuing to 
be very strong.
    So, employment-to-population ratio is what we would suggest 
we should look at much more than labor force.
    Mr. KUSTOFF. Thank you very much.
    As it relates to the taxable maximum, so this year it is a 
little over $160,000, $160,200. If you go back five, six years, 
seven years maybe to 2016, it was $118,500. So, in that time 
span, it has gone up a little over $40,000.
    I understand we had a big cost-of-living increase with this 
past year. What is the significance of the taxable maximum 
increasing almost $40,000 as it relates to the depletion of the 
trust fund, if that makes sense?
    Mr. GOSS. Thank you.
    Well, the taxable maximum under the law is increased every 
year with a two-year lag based on the rate of growth in the 
average wage for all workers in our economy.
    So as the average wage of workers in the economy grows, so 
does the taxable maximum. With the intent, back in 1983, that 
we would stay at 90 percent of the covered earnings being 
taxable.
    For better or for worse, we have about six percent of 
workers, probably many in this room, who earn more than the 
current taxable maximum and have ever since 1983. Six percent 
have earned above the taxable maximum.
    The average earnings levels for people above the taxable 
maximum have been rising considerably faster than for the 94 
percent below, and as a result, we have had an increasing share 
of all covered earnings going above the taxable maximum.
    It has dropped our 90 percent taxable down to about 82 and 
a half percent taxable, and that has been a major effect, 
knocking down the amount of revenue we would otherwise have 
been getting had it stayed at 90 percent, by over eight 
percent. So that is a very significant effect.
    Many proposals have been put forth to raise the taxable 
maximum further to get us back to or close to 90 percent. There 
is that possibility that I am sure you all will be thinking 
about and considering.
    But really that has been a major effect. The differential 
rate of growth in earnings for the highest versus lower earners 
has been a major factor.
    Mr. KUSTOFF. Thank you, Mr. Gross.
    Dr. Swagel, in the remaining time I have got, which is not 
much, the worker ratio to beneficiary today is at three-to-one?
    Mr. SWAGEL. It is lower than that. What is it? Two, point, 
six. So you have got 2.6 to 1 today, and then it is scheduled 
to go down over the next decade, and then further beyond that.
    Mr. KUSTOFF. Where do you project that to be in the year 
2033 or do you have a projection?
    Mr. SWAGEL. We do. I wrote that down. It is 2.6 today, 
going to 2.3, and that is the retirement of the Baby Boom 
generation which is really like the key there.
    Mr. KUSTOFF. And one more question. I know I have run over.
    Do you know what the worker ratio was in 1983?
    Mr. SWAGEL. Ah, that is a great--it must have been higher. 
I do not know. I am looking at my colleague here, the 
historian.
    I was looking at Barry, but Steve might know also.
    Mr. HUSTON. I do not know, but I think one thing to keep in 
mind, too, is the program has changed over time, first in the 
amount of the people who are eligible for dependent benefits 
has increased, but then also the coverage has changed as well.
    So, some of the older numbers from the 1940s and 1950s kind 
of reflect the different population.
    Mr. KUSTOFF. Good. Thank you very much.
    I yield back.
    Chairman FERGUSON. Thank you.
    I will now yield to my friend and colleague from the Empire 
State, Mr. Higgins.
    Mr. HIGGINS. Thank you, Chairman Ferguson and Ranking 
Member Larson.
    Dr. Swagel, just the last line of questioning, so 2.6 
workers today for every Social Security beneficiary, and where 
is that schedule to go over the next three to five years?
    Mr. SWAGEL. We have it down to 2.3 at the end of the ten-
year budget window in 2033, again, reflecting the retirement to 
the Baby Boom generation.
    And then 75 years hence we have it below two, down to 1.7.
    Mr. HIGGINS. Did you--sorry. Go ahead.
    Mr. GOSS. Thank you.
    If I might add, keep in mind that the worker-to-beneficiary 
ratio is fundamentally just an outgrowth of what is happening 
with the changing age distribution of the population.
    The Baby Boom generation, which was large, is in the 
process of retiring, between 2008 and 2035, but the real reason 
that these ratios are changing is not because the Baby Boomers 
are retiring. It is because the successive generations that are 
younger than the Baby Boom are relatively smaller. They are 
born of birth rates of 2.0. The Baby Boom generation was born 
of birth rates during that time 1946 to 1965 at 3.3 children 
per woman.
    So it is the drop in birth rates from 3.3 down to 2.0 that 
is really causing this change, and it is not the pig in the 
python as we sometimes talk about.
    Mr. HIGGINS. I understand. What is the net effect----
    Mr. GOSS. Baby Boomers had a fundamental change in the 
distribution.
    Mr. HIGGINS. What is the net effect of immigration as it 
relates to worker-to-beneficiary ratio?
    Mr. Goss. Immigration is truly crucial.
    Mr. HIGGINS. How crucial?
    Mr. GOSS. Where we have roughly on the order of about four 
million births in our country each year, the net immigration 
has been and we expect to be upon the order of about one 
million. So that basically augments births by about a 25 
percent increase.
    Without that kind of positive net immigration, we would 
have a very different distribution. Immigration tends to be 
people coming in in their 20s and 30s. So it is almost like 
having had more births 20 or 30 years ago.
    Immigration is critical. By the way, immigration, we have 
had the same legal immigration limits for quite some time in 
legislation now, and that is something that perhaps ought to be 
considered for the future.
    Mr. HIGGINS. Dr. Swagel, do you concur?
    Mr. SWAGEL. Yea. I mean, fundamentally it is a changing 
distribution of the workforce. It is the inflows and outflows, 
right? It is the births, participation, immigration, the 
inflows, retirements, and mortality.
    And absolutely, immigration would affect participation and 
affect the age distribution of the population.
    Mr. HIGGINS. As this has been said, the first Social 
Security check went out in 1940 and has never missed a payment, 
which speaks to the strength and the resiliency of that 
program.
    In my district alone 156,000 people receive Social Security 
benefits. I am one of 435 congressional districts. Two hundred 
and sixty-three million dollars in Social Security benefits 
flow into my district every month.
    We have a $23\1/2\ trillion economy. What happens with 
Social Security benefits historically? Are they saved? Are they 
spent? What is the percentage that is spent?
    Dr. Swagel, anybody on the panel.
    Mr. SWAGEL. Yes. I can talk a little bit about that. And it 
depends on the household. Households with low lifetime income, 
so people at the bottom of the distribution, when they retire 
for them Social Security is the biggest part of their 
retirement income, and that money is spent, and there is fewer 
savings, and it is spent.
    And that is why getting to these in 2032 would have by far 
the biggest impact on those lower income households.
    Mr. GOSS. If I might add, the level of Social Security 
benefits depends very much on what your career average earnings 
levels have been. People with very low career average earnings 
will have a benefit that is maybe on the order of as much as 
two-thirds as much as what their earnings were.
    And this is by intent of Congress, which recognizes that 
people with very low earnings throughout their career have had 
relatively little opportunity to save and are unlikely to have 
a good pension from their employer.
    Highest earners have a replacement rate of closer to maybe 
more like 25 percent, much, much lower because that is the 
structure of the program, the benefit formula, and for average 
workers it is about 40 percent.
    For the lowest earners, as Dr. Swagel indicates, surely 
this is pretty much just what people are living on. It has been 
indicated that something like about half, maybe a little less 
than that, or more than that of Social Security beneficiaries 
are receiving benefits and that is their only income.
    Mr. HIGGINS. Just to close, Mr. Chairman, there has been a 
lot of talk about making changes to Social Security to secure 
its long-term viability. Our colleague and the ranking member, 
John Larson, have a bill, Social Security 2100. It is 
comprehensive. It asks tough questions, and it comes up with 
realistic solutions to the long-term problem that we face as a 
Nation not only in terms of Social Security, but the issue of 
retirement savings generally.
    Because as a Nation, we are falling significantly short, 
and that is not good for anybody. So, I would ask the committee 
to please consider a piece of legislation that is very 
thoughtful. It is very comprehensive, and it goes a long way 
toward the goal of securing the long-term viability of Social 
Security.
    And I yield back.
    Chairman FERGUSON. Thank you.
    I thank the gentleman now. The gentleman from Ohio, Mr. 
Carey, is recognized for five minutes.
    Mr. CAREY. Thank you, Mr. Chairman.
    First, I want to thank both the chairman and the ranking 
member for bringing this panel together today. I mean, this is 
a bipartisan issue. As somebody who grew up with family members 
that Social Security was the only income that they had as they 
went into their senior years, I truly appreciate it.
    And I just want everybody to understand that whether you 
are a Democrat or you are a Republican, we believe in the 
importance of this issue and do appreciate the panelists for 
being here.
    Millions of Americans depend on Social Security each month, 
as my family did for many, many years, and it is imperative 
that we have a conversation about the current state and the 
future of Social Security and that we work together both on my 
dear colleagues from the left and our side to preserve and 
protect this program.
    Tens of thousands of public servants in my home State of 
Ohio split their careers between employment, where they 
contribute to Social Security through payroll tax 
contributions, and jobs where they instead make contributions 
to the public pension plans that operate as Social Security 
subsidies or as substitutes.
    As a result, I often hear from my constituents the subject 
of Social Security windfall elimination provisions with LEAP 
and the government pensions offset with GPO.
    Again, you know, as somebody that just came to Congress 15 
months ago, there is a lot of political rhetoric back and 
forth, but I think in the end people have to understand, we 
truly believe in this program, and on both sides, we want to 
make it strong. We want to make it secure for the people that 
rely on it, as my family did.
    So Mr. Huston, when were these policies enacted that was 
the intent of Congress at the time as it relates to, you know, 
our discussions today?
    Mr. HUSTON. In terms of the weapon GPO?
    Mr. CAREY. Yes, yes.
    Mr. HUSTON. The government pension offset, or GPO, was one 
of the provisions included in the 1977 amendment, and the 
congressional intent behind it was to replicate the dual 
entitlement rule.
    So, under the dual entitlement rule, some beneficiaries 
qualify on their own earning records and also for spousal 
benefit records. So for those people, the spousal benefit is 
offset to account for that, to account for unintended benefits.
    The government pension offset applies to people who are 
entitled to a pension for noncovered government employment. For 
those people, their Social Security spousal benefits are 
offset, a certain amount, to account for income received from 
that non-government pension.
    Mr. CAREY. So let me ask you this. When people who are 
affected by WEP and GPO receive their Social Security benefits, 
do the amounts reflect their actual individual work history?
    And as a follow-up because I am running out of time, why or 
why not?
    Mr. HUSTON. So for people who take benefits based on their 
spouse's earning records, their benefits reflect their spouse's 
earnings, and they are entitled to a certain percentage of 
their spouse's primary insurance amount of PIA.
    In terms of the windfall elimination program or windfall 
elimination provision, sorry, that was out of the 1983 
amendments, and that is for persons who have their own 
noncovered government pension.
    The reason for that is the Social Security benefit formula, 
under current law, looks at everybody's, all workers' covered 
wage. So, somebody who has a long earnings history at low wages 
might present to the formula the same way that somebody that 
only has ten or 15 years in covered earnings and might have 
relatively higher wages.
    So the formula, once everything is averaged out, they kind 
of look similar even though that second person hypothetically 
has a pension from noncovered employment.
    Mr. CAREY. So, can you help us understand real quickly why 
the WEP and the SPO look like they do today?
    Mr. HUSTON. Essentially, the congressional intent was for 
each of those people getting noncovered government pensions, 
they were receiving benefits higher than Congress had intended, 
and this reduces their benefits.
    The GPO effects, I believe it is about one percent, and the 
WEP effect is about three percent of beneficiaries.
    Mr. CAREY. Well, I want to thank the chairman and minority 
team here. This is, again, very important issue for all of us 
bipartisanly, and we hope to continue to work with you and take 
your advice.
    And I appreciate the opportunity to have this session with 
you today.
    So, Mr. Chairman, I yield back.
    Chairman FERGUSON. Thank you.
    And as I have discussed with my ranking member here, we are 
going to continue down and we are going to get through the 
members of the subcommittee, and then we will go to those 
members that are read in.
    So with that I am going to go to the gentleman from Iowa, 
Mr. Feenstra. You are now recognized.
    Mr. FEENSTRA. Thank you, Chairman Ferguson and Ranking 
Member Lawson.
    I just want to thank all three of you for being here today. 
All three of you are the experts. You are very knowledgeable, 
and I have enjoyed reading your testimonies.
    Dr. Swagel, I got to know you from last year when you were 
in front of the Budget Committee in May, and I appreciated you 
then.
    With that, I have just got a couple questions that are more 
curiosity questions than anything. The CBO's budget and 
economic outlook of 2022 through 2032 stated, ``In keeping with 
the rules of Section 257 of the Balanced Budget and Emergency 
Deficit Control Act of 1985, the CBO's baseline projection 
incorporates the assumption that scheduled payments will 
continue to be made in full after the Trust Fund has been 
exhausted.''
    You also mention in your current testimony, Dr. Swagel, 
that projections of Social Security are required by statute to 
reflect the scheduled benefits. In essence, assuming that 
Social Security will be fully funded even though it might start 
running into insolvency.
    I guess my question is can you explain the reasoning for 
that restriction in 1985. Why was that put in that Act? Do you 
know?
    Mr. SWAGEL. Okay. You know, I will tell you the way that we 
think about it. That tells you the obligations. The scheduled 
benefits are legal obligations of the Federal Government. At 
the exhaustion date in 2032, the Treasury does not have the 
legal authority to pay the full benefits if a 25 percent 
shortfall.
    But showing you the scheduled benefit tells you what is 
owed, and then we do payables so you know what we are able to 
pay.
    Mr. FEENSTRA. So I get that. But I believe that the ability 
for the current projections to show a reduced scheduled payment 
and show insolvency through the CBO, I mean, it is sort of a 
Catch-22, right? I mean, the CBO, we look at the CBO of what is 
going on and yet, it is probably not the true picture.
    Mr. SWAGEL. Yes, and we follow the rules.
    Mr. FEENSTRA. You have to, right? I am just more curious 
than anything.
    Mr. SWAGEL. And, you know, that is why I focus a lot on 
payable benefits, is that you have the understanding of what 
the system can afford.
    Mr. FEENSTRA. Right, yes.
    Mr. SWAGEL. Under current law.
    Mr. FEENSTRA. Yes. So, Dr. Swagel, I go again. Social 
Security is going to pay out about 1.1 trillion this year or 
something like that. Can you discuss how the CBO projects this 
to change over time in both present value dollars and 
percentage of GDP, meaning, you know, what do you see as we 
move forward here?
    Mr. SWAGEL. Yes, yes. So as you said, it is over a trillion 
this year in nominal dollars. At the end of the ten-year budget 
window, it is close to 2.4 trillion. That is of nominal 
dollars, and it is rising as a share of GDP. So it is just over 
five percent of GDP now.
    Mr. FEENSTRA. Right.
    Mr. SWAGEL. We have that rising to six percent of GDP in 
ten years, and then further over seven.
    Mr. FEENSTRA. It is about really, to me it becomes sort of 
real. I mean looking at the economics part of this it is like, 
all right, when that starts climbing, your GDP, okay----
    Mr. SWAGEL. And it is contributing to the deficit challenge 
and the fiscal challenge.
    Mr. FEENSTRA. Right.
    Mr. SWAGEL. It is a big piece of it.
    Mr. FEENSTRA. Yes, yes. And then how does this differ when 
you talk about scheduled benefits?
    Okay. You have got scheduled benefits, and then when you 
are also talking about payable benefits, obviously there is a 
discrepancy there, too, then.
    Mr. SWAGEL. Right, and the payable benefits would start at 
about 25 percent less at the end of the ten-year window, that 
rises out to, say, about 30. We have not done the calculation 
yet, but into the mid-30s by the end of 75 years.
    So that payable benefits removes the impact on the long-
term deficit.
    Mr. FEENSTRA. That is right, that is right. Thank you for 
that.
    Mr. Goss, I find this interesting, too. The COLA increase, 
obviously was pretty significant this year, 8.7 percent, and I 
get it. I assume it is probably due to inflation.
    Do you see COLA increases as a significant reason as we 
start looking toward insolvency?
    I mean, is this sort of a real thing, right? I mean, when 
we start looking at COLA continuing to increase, inflation is 
increasing, although I would look at wages are increasing.
    How do you square that up?
    Mr. GOSS. That is really the key issue. If inflation 
increases and wages also increase so that we maintain wages----
    Mr. FEENSTRA. Are wages keeping up though with inflation?
    I guess that is the precursor to this.
    Mr. GOSS. Well, in 2021 we did have it, and I believe it 
was an 8.9 percent increase in the average wage, and then in 
2022--and by the way, that will impart itself on the benefit 
levels for people starting benefits in 2023 with the two-year 
lag.
    We are also having in 2023 a cost-of-living adjustment of 
8.7 percent for people already receiving benefits. So as long 
as these move in tandem, it is not a problem.
    Mr. FEENSTRA. Correct.
    Mr. GOSS. And in fact, actually the way the system works is 
if we have both wages and prices growing more than normally 
expected in a period of time, that is actually a positive for 
the program.
    Mr. FEENSTRA. It could be, yes.
    Mr. GOSS. Because the wages are taxed immediately, but the 
increase in prices actually occur with a lag.
    Mr. FEENSTRA. That is a good point, and I know my time is 
up, but I know late 1970s, early 1980s, I think it was 
different. I think it was change reversed.
    Mr. GOSS. That was a real problem back then.
    Mr. FEENSTRA. Yes.
    Mr. GOSS. If I may just mention though, I understand Dr. 
Swagel's issue here with having a requirement to indicate what 
the cost of the program is, ignoring the fact that reserve 
depletion might cause us not to be able to pay it all.
    The Trustees do exactly the same thing. The only thing I 
would suggest that perhaps you ask of CBO and others if they 
are going to project the cost of the program which the Trustees 
also do, to be very clear if they indicate per some requirement 
that the expenditures will equal what the intended obligation 
is.
    That would require a change in the law.
    Mr. FEENSTRA. That would. That would.
    Thank you, and I yield back.
    Chairman FERGUSON. Thank you.
    Next, the gentleman from Florida is recognized, Mr. Steube.
    Mr. STEUBE. Thank you, Mr. Chairman.
    Mr. Huston, a growing issue for seniors is the taxation of 
Social Security benefits, particularly after the past two cost-
of-living adjustments or COLAs, which caused many seniors to 
pay taxes on their benefits for the first time.
    I have one of the most elderly districts, if not the most 
elderly district in the country. So obviously this is a big 
issue to the constituents in my district.
    Can you provide us some background on this policy, when it 
was established, how many beneficiaries did it affect then, and 
how many does it affect now?
    Mr. HUSTON. Right. Thank you.
    The provision to tax a portion of Social Security benefits 
was one of the recommendations made by the Greenspan Commission 
and was then included in the 1983 Social Security amendments.
    At the time, the Greenspan Commission estimated that about 
ten percent of beneficiaries would be affected by it, and as 
you know, as wages increase over time, as COLAs are applied to 
benefits and made payable, Social Security benefits generally 
increase.
    So, since the thresholds for someone to be subject to 
taxation of benefits are fixed in statute, as benefits 
increase, more and more people then become subject to that tax.
    The most recent data we have available suggest about 50 
percent of beneficiaries are now affected by that, and at the 
time that was part of the congressional intent, is that 
eventually all people in theory would be subject to that tax 
with growth in benefits.
    Mr. STEUBE. So as close as you know as we sit here today it 
is about 50 percent of beneficiaries.
    Mr. HUSTON. Correct.
    Mr. STEUBE. Okay. Dr. Swagel and Mr. Goss, both of you guys 
can answer.
    Can either of you speak to the proportion of program income 
that is derived from the taxation of benefits?
    Is that proportion expected to grow or shrink over the next 
ten years and why?
    Mr. SWAGEL. I can say that we have about four percent of 
beneficiaries are paying the tax today, and that is rising. We 
have up to six percent in ten years and then up to 11 percent.
    As you said, the threshold is fixed in nominal terms, and 
as real income gains, so it is rising. I do not have the exact 
dollars, but as you said, it is becoming a rising share of 
people and of dollars.
    Mr. STEUBE. Could you get me the exact dollars? I mean, I 
do not need it right now.
    Mr. SWAGEL. Sure. We will get you the exact.
    Mr. STEUBE. Oh, do you have them, Mr. Goss?
    Mr. GOSS. Yes. If I may, I believe what Dr. Swagel meant 
was the proportion of total income of the program. In 2022, the 
proportion of total income to the program from taxation of 
Social Security benefits for OASDI was about four percent.
    In 2027, we project that will go up to about 5.2 percent; 
2033, about six and a half percent; by 2050, about seven 
percent.
    As Barry indicated, this is really simply because of the 
fixed 25,000 for single returns, 32,000 for joint returns 
thresholds on AGI plus half of benefits.
    Mr. SWAGEL. I should say what Steve has said is not quite 
right under current law. He is assuming that the Congress will 
take action to change the indexation of tax thresholds. That is 
why we have slightly different numbers.
    We assume current law, and the Trustees are assuming that 
Congress will take certain steps.
    Mr. GOSS. If I may Phil, we assume current law for the 
Social Security Act. However, by constructive obligation as any 
accountant will tell you, we have to take into account other 
things that might occur.
    The Congress has always made changes to the income tax 
structure. If they had not, we would all be in the top bracket, 
every single person.
    So we expect it. There will not be that kind of bracket 
creep indefinitely, and that change will be made over time. We 
do reflect that.
    And by the way, we projected really since the very 
beginning that we would start at about ten to 20 percent. We 
are now up to a little less than 50 percent, we believe, of our 
beneficiaries for what we hear from the Office of Tax Analysis 
to Treasury, and we have been projecting all along that it 
would reach up at about 60 percent because, of course, a good 
number of the beneficiaries will receive sufficiently low 
income that they will not even meet the zero bracket and, 
therefore, have to pay taxes on their benefits.
    Mr. STEUBE. Okay. So I will open this up to any of you that 
want to comment on this.
    So how can we give seniors more predictability about the 
taxation of benefits so they know what to expect, when to 
expect for planning for their future?
    I know you may be anticipating Congress to make certain 
action. Just I will open it up in the 30 seconds I have back to 
anybody to comment on the predictability for the seniors.
    Mr. GOSS. Well, I would just say that as long as Barry 
indicated people understand the 25,000 and 32,000 thresholds, 
and that eventually simply because of inflation over time, 
earnings, prices, and benefits will all be rising. Eventually 
we are going to have a much greater share of our beneficiary 
population with MAGI--that is modified adjusted gross income--
exceeding these thresholds and, therefore, having some 
liability on their taxes. So we should do that.
    If you all had a desire to stabilize or reduce the 
percentage of people who will have income tax liability on 
their benefits, that could be done by statute, by simply 
raising the 25 and 32,000 levels.
    So it is really a choice.
    Mr. STEUBE. Thanks.
    My time has expired.
    Mr. SWAGEL. That is what the baseline is showing you, is 
what current laws and our projections are showing you current 
law, as opposed to assuming certain changes in the future law.
    Mr. STEUBE. Thank you.
    Chairman FERGUSON. Thank you.
    Next is the distinguished gentleman from Illinois is 
recognized. Mr. Davis, welcome to the panel for the day. We are 
glad to have you as part of this.
    Mr. DAVIS. Thank you, Mr. Chairman, Dr. Ferguson, Ranking 
Member, Mr. Larson, and witnesses.
    Social Security is a lifeline for Illinoisans living in my 
congressional district. Social Security guarantees income 
security and health protection, contributes to prevention and 
reduction of poverty and inequality and promotes our residents' 
social inclusion and human dignity.
    Social Security is one of our Nation's most successful 
policy accomplishments. Yet inexplicably Republicans have 
targeted Social Security for steep cuts that would harm seniors 
and those with disabilities.
    The Republican Default on America bill on the floor today 
would harm Social Security recipients as soon as 2024. The 
Republican Study Committee's most recent budget plan would 
raise the Social Security retirement age from 67 to 70. This is 
a nearly 20 percent benefit cut across the board.
    Raising the age is a cut for every worker, no matter their 
age or when they retire. Under the RSC plan, every worker who 
retires would receive less than under current law.
    Those who support this benefit cut often say we are living 
and working longer, but they fail to acknowledge that for some 
groups, life expectancy has been flat or even declined.
    In addition, many people do taxing work that wears out 
their bodies. They work on the assembly line, in construction, 
waiting tables, in nursing, home health, and other physical 
employment. They cannot choose when they retire.
    Finally, where are the employers who are now eager to hire 
older workers? Age discrimination is a despicable but all too 
common reality.
    It is clear that raising the retirement age is not only 
unfair but would be extremely inequitable. It would simply 
leave millions with no job and lower Social Security benefits. 
That is why Americans overwhelmingly opposed raising the 
retirement age.
    And I ask unanimous consent to enter into the record, Mr. 
Chairman, a report by the nonpartisan National Academy of 
Social Insurance, which conducted an in-depth, multi-
generational survey, which found that 75 percent of surveyed 
Americans opposed raising the retirement age to 70.
    Chairman FERGUSON. So ordered.
    [The information follows:]

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    Mr. DAVIS. Thank you.
    The Republican Study Committee's most recent budget plan 
would cut benefits for the middle class. Specifically, the RSC 
plan would cut benefits for everyone whose earnings are more 
than $60,000 a year.
    In addition, the RSC plan would cut benefits for anyone 
regardless of their past earnings who stops working for a time 
due to childbearing, family caregiving, education, and 
training, layoffs, illness, or injury, or any other reason. 
These cuts would have a devastating effect on my constituents.
    The Republican Study Committee's most recent budget plan 
would lengthen the Medicare waiting period from two years to 
five years rather than raising. There should not be a waiting 
period at all.
    And so, Mr. Chairman, nothing is really more important to 
the citizens of my district and millions of other Americans 
than Social Security, a plan that is effective, efficient, and 
takes care of the needs especially of those who are aged and 
ready to retire.
    I thank you, Mr. Chairman, and yield back the balance of my 
time.
    Chairman FERGUSON. Thank you, Mr. Davis.
    And once again, I would like to put your mind at ease, that 
this committee or this subcommittee will be taking very much a 
bipartisan approach to problem solving, and I do not think that 
you will have to worry about voting on the RSC plan on this 
subcommittee.
    So, with that I will now yield to a dear friend and 
colleague from the Great State of California. Mr. Panetta, you 
are now recognized for five minutes.
    Mr. PANETTA. Thank you, Chairman Ferguson. I appreciate 
this, and I appreciate calling you chairman personally. 
Politically not so much, but personally as a classmate, as a 
friend, it is good to say that.
    And of course, Ranking Member Larson, thank you for all 
your good work on Social Security, and I look forward to 
calling you chairman soon.
    Today's hearing is obviously critical. I think we all 
understand that, and that is why I have been honored to waive 
on. So I appreciate this opportunity.
    But it is especially critical because given the long-term 
solvency challenges of Social Security that we have been 
discussing today.
    Social Security is critical to my constituents in the 19th 
Congressional District there in California on the central coast 
and up in the San Jose, where over 100,000 people receive 
Social Security benefits, 174 billion worth, billion with a B.
    But its promise to pay out benefits for the long-term 
obviously, as we know, was threatened according to the Social 
Security Trustees report. Social Security is just 11 years from 
insolvency, and when today's 56-year-olds reach their full 
retirement age and today's youngest retirees turn 73 is when 
that is going to happen.
    So, we cannot ignore the 2.8 trillion in deficits that 
Social Security will run over in the next decade. 
Unfortunately, the longer we wait to make adjustments, the more 
painful those adjustments will be to our workers and to our 
retirees.
    And if we do nothing, we are going to be faced with 20 
percent across the board cuts, which would be devastating, 
devastating to our seniors.
    Now, of course, there are some obvious solutions, and yes, 
I support Rep. Larson's Social Security 2100 Act, but we should 
also be talking about raising revenue in regards to, I believe, 
raising that payroll cap, 160,000, and look at some sort of 
reduction in benefits, but I think there has to be a 
combination of all of the above.
    Now, I know that any solution to our Social Security crisis 
must be bipartisan. I am a firm believer in that, and that we 
have to carefully examine the growth of the program and its 
impacts to our long-term solvency.
    So obviously I am glad we are here today, glad we are 
having this conversation because we do have a lot to talk 
about, but more importantly, we have got a lot to understand 
when it comes to how we can make our Social Security system 
solvent, and that is why I appreciate the testimony of our 
experts here today.
    One of the solutions that is also out there, and I think is 
important and was discussed by my colleague, Mr. Higgins, 
obviously is immigration.
    And so, Mr. Swagel, if I could, our payroll taxpaying 
workforce is obviously not limited to those born in this 
country. What impact would an increase to the American 
workforce through legal immigration have on Social Security's 
finances?
    Mr. SWAGEL. Increased immigration would increase the size 
of the economy, increase the size of payrolls, and improve the 
financial status of Social Security, depending on the age 
composition of the immigrants.
    But assuming that these are people of working age, 
immigrants tend to work at a high rate of working age, and that 
would improve the financial status of the system.
    Mr. PANETTA. Mr. Goss, same question to you, sir.
    Mr. GOSS. It would unequivocally improve the financial 
status of Social Security. Generally speaking, legal immigrants 
are brought into the country in their 20s or 30s. So they would 
have a long time during which they would be contributing to the 
system.
    And even if we were to bring in some much older 
individuals, they would not have been in the country long 
enough then to have earned rights to Social Security benefits. 
So there is no question.
    And one thing we always point out about immigration, that 
is just the first order effect. Bringing in younger people who 
will be working and contributing to the system, but the more 
important thing since we are talking about things like birth 
rates, if we bring people into the country, typically, people 
who enter the country as immigrants tend to have higher birth 
rates, and if we do bring people in in their 20s and 30s and 
they have children, that greatly enhances the number of births.
    So it would be a multiplicity of positives for Social 
Security.
    Mr. PANETTA. Thank you, Mr. Goss. I have got to reclaim my 
time.
    Mr. Huston, and I have got one question for you. In regards 
to the Greenspan Commission, are you familiar with that?
    Mr. HUSTON. I am, yes.
    Mr. PANETTA. Okay. Great. All right. Can you speak to some 
of the solutions that Greenspan Commission came up with, which 
obviously was followed by and adopted by Congress?
    And what would have happened if Congress had not enacted 
those recommendations?
    And you have got 37 seconds.
    Mr. HUSTON. Well, I will answer the last part first. I 
think in reference to Mr. Goss' earlier comment is that has not 
happened yet, and we are unsure what would happen if revenues 
no longer could support full payments, and that was projected 
to have happened within weeks or months before the passage.
    The key things that I think the Greenspan Commission 
recommended were delaying and increasing the COLA, increasing 
coverage of the program to newly hired Federal employees, and 
something Congress also did later was add the amendment to 
increase the retirement age.
    So it was a combination of things that increased revenues 
and also decreased costs.
    Mr. PANETTA. Great. Thank you, gentlemen.
    Thank you, Mr. Chairman. I yield back.
    Chairman FERGUSON. Thank you, Mr. Panetta.
    I now would like to thank our witnesses for being here 
today. Thank you for not only your service to this country but, 
most importantly, to this subcommittee today.
    Again, I would like to thank Ranking Member Larson and, 
yes, feel free to make a comment there, please.
    Mr. LARSON. Well, thank you, Mr. Chairman.
    I want to first and foremost commend you on your 
introductory hearing as chairman of the committee, and I want 
to thank you for the positive step.
    I know you appreciate the skepticism on our side given the 
Republican Study Committee's report and its very specific 
recommendations.
    I further, therefore, appreciated what you had to say about 
this, and we look forward. And my question would be when would 
the next hearing be and can we count on beneficiaries coming 
forward so that, as you heard from a number on our side today, 
the concern about the impact on people, and that being very 
important in terms of the so-called numbers and statistics that 
we are going to have to deal with.
    Chairman FERGUSON. So, Mr. Larson, we will give you plenty 
of notice as to when the next hearing will be.
    And as we go through and analyze the testimony today and 
look at the testimony, we will then formulate what we plan to 
do at the next hearing.
    At some point I agree with you having beneficiaries here 
will be an important part of the conversation.
    Please be advised that members have two weeks to submit 
written questions to be answered later in writing. Those 
questions and your answers will be made part of the formal 
hearing record.
    With that the subcommittee stands adjourned.
    [Whereupon, at 11:54 a.m., the subcommittee was adjourned.]
      

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