What Does Bill Thomas Have Up His Sleeve? Jude Wanniski May 2, 2005

Memo To: Congressional Democrats
From: Jude Wanniski
Re: Fixing Social Security

Yes, you are all studying public opinion polls that show the American people do not favor personal accounts as part of the Social Security system. But I think you had better be prepared for a shift in the polls now that President Bush has put the outlines of his plan before the nation and handed the ball to House Ways&Means Chairman Bill Thomas. There has been a "game plan" which you Democrats should have been able to see developing, but because you are hung up on those negative polls, you are going to be caught flat-footed when you see what develops after the Ways&Means hearings that will crank up later this month. Meanwhile, I advise you to read the excerpts I've selected of the transcript of the news conference that Chairman Thomas held on Friday. There are some clues as to what he has up his sleeve.


U.S. REPRESENTATIVE BILL THOMAS (R-CA) NEWS CONFERENCE
APRIL 29, 2005

THOMAS: Good morning. My name is Bill Thomas, and I'm chairman of the Ways and Means Committee.

First, I want to thank the president. I want to thank him for bringing to the attention of the American people a political issue that is long overdue for addressing.

Secondly, I want to thank him for the time he has spent traveling the country, making sure that all Americans know that one of the fundamental portions of the safety net is in trouble.

And then, finally, I want to thank him for last night, in which he indicated that he had goals to help retiring Americans. And those goals clearly were to make sure that future generations receive benefits equal to or greater than today's seniors; to protect those who depend on Social Security the most; and to make sure that younger workers, one, believe that Social Security will be there for them, and that it will be real money.

THOMAS: I'm pleased to announce this morning a series of hearings beginning on May the 12th and continuing, at least one a week, until we produce legislation probably in the early part of June. The hearings will be initially in the full committee, and then I'll transfer the hearings to the chairman of the subcommittee, the gentleman from Louisiana, Jim McCrery.

The Ways and Means Committee has had one hearing on Social Security, which was a broad-based, fundamental theory in practice hearing in which the Social Security trustees, Social Security actuary, and Mr. Walker, head of the GAO, brought testimony about the history, where we are and what will occur if no changes are made.

So the basic point today is that the House of Representatives will respond to the president's challenge of addressing a fundamental safety net that is in trouble....

I would like to spend just a couple of minutes so that the media can appreciate what went on in 1983. I was a member of the subcommittee, the only member of the Ways and Means Committee today that was on the subcommittee. And I will present to you some of the materials that I had hoped someone had looked for to be able to understand what actually occurred in 1983.

Return with me, briefly, to 1983.

In 1977, the Congress had made some changes to "fix," quote, unquote, Social Security. However, it was clear that the quote, unquote, "fixes" were not sufficient. The president created a commission. The commission reported in January of 1983. And through February and March, the Ways and Means Committee and the Senate Finance Committee met.

I would refer you to the March 9th [1983] Congressional Record for the debate on the floor of the House, and some of the points that were made at that time -- and I'm pleased to say, some of them made by me -- are about the kinds of changes that were necessary to make sure that Social Security was not fixed just for a short period of time, but fixed permanently.

And it was obvious at that time that the American population was changing. Seniors were living longer. They had needs then. All of the points that were made in 1983 are even more emphatically made today.

But I've heard a number of my colleagues discussing the bipartisan agreement and why can't we just go back to the way it was in 1983. I waited in vain for any media, print or video, to go back and actually examine what happened in 1983. And unfortunately, as is more and more the case, you simply show and take the words for someone who stands and says, "It was a bipartisan agreement and why can't we get back to those days."

Take a look at the sheet I gave you in terms of the votes that occurred on the floor of the House on March 9th. There was an underlying bill and there were two amendments.

One amendment was offered by the chairman of the Subcommittee on Social Security, J.J. Pickle from Texas. The other amendment was offered by Mr. Pepper, who was a congressman, former senator, from Florida.

The Jake Pickle amendment extended the age, beginning to address the change in the American population growing older and therefore stretching the time at which members are to retire.

The Pepper amendment simply went back to the same old, same old of increasing payroll taxes even more than was currently planned to be increased.

If you'll examine the Pickle amendment, there were 228 yesses and 202 noes. There were 188 Democrats who voted no about addressing fundamental changes to help save Social Security. There were 152 Republicans who voted yes and 76 Democrats. It was Republicans who wanted to fundamentally address changing Social Security to address the changing population.

The Pepper amendment said raise the payroll taxes even more than we were planning to raise them. One Republican and 131 Democrats said yes; 165 Republicans said no. The Pickle amendment was passed by Republicans, and the Pepper amendment was defeated by Republicans.

Now, let's visit the statements made last night: Republicans simply want to cut benefits. Republicans simply want to hurt low-income people. Of course, the current Democrat position is no. But if you scratched the no, they would be very pleased to once again vote for a Pepper-type of amendment.

What the president has done is fundamentally courageous. And what Republicans will do will be to follow the president.

The American population continues to change. We need to address a number of provisions in Social Security, not just in terms of age and benefit payout, but also, frankly, the share of the pie based upon who the individual is -- gender, et cetera.

Widows currently who are lower-income don't get a fair deal. Why is it that the disabled have to wait 24 months before they're placed on Social Security rolls? Twenty-four months. And I do want to remind you that part of the 1983 Social Security package was to delay the cost-of-living increase from June until December. Why? Because the Social Security actuary said we're going to run out of money in July.

The president rightly has stepped forward, and the majority in the House is stepping forward to join him, to never, ever have a day when Congress is required to vote in March to delay payments a half a year because we're running out of money.

Listen to the responses of the Democrats, both in the House and the Senate: "We don't have to cut to 70 percent of the benefits until 2042." In 2040, they'll be saying, "We have two more years." And then it'll be a crisis situation, as it was in 1983. They'll say, "Raise the payroll taxes."

Never, ever should the American people expect their Congress not to address a problem as fundamental and difficult as Social Security until it's a crisis.

THOMAS (cont): The president never said it was a crisis. The president said Social Security is in trouble. I agree with the president. I was there in 1983. The response was inadequate at the time, it relied way too much in payroll tax increases, and we have run out of time.

Every time you don't fundamentally address changes in Social Security to meet changes in the population, you will run out of time.

The president has rightly said, "I want it fixed once and for all, for all time." We'll accept that challenge. We'll offer a proposal which will fix Social Security actuarily for all time, certainly beyond the 75 years.

And we will address changes in the system that are necessary because the American population has changed. And if the Democrats don't want to do that, then it isn't news. The Democrats didn't want to do it in 1983, so no one should be surprised. Republicans were responsible then in changing the payroll tax and changing the basic plan.

We will approach the president's goals just as we did in 1983. We were a minority then and we weren't able to prevail. We are a majority today and we will prevail. Seniors 55 and older don't need to worry. Younger workers who now worry will not need to worry. It will be a more compassionate, a fairer and a better Social Security. And now I'll invite any questions.

QUESTION: Mr. Chairman, you said that you will approach the president's goals (inaudible) price indexing proposal. Will you and the Republican leadership and the whole Republican caucus have the courage to use that as a basis for your legislation?

THOMAS: I said in January that the American population has changed. The president focused on Social Security. I wanted to look at a number of other factors affecting retirement, and we will be doing that.

Clearly, Social Security is the core. But also the whole question of pensions and the changing nature of pensions in today's society and the question of personal savings. We're going to be looking at a number of issues. But it clearly makes sense to me, and apparently it makes sense to the president, that for those who are most in need, as he stressed, Social Security, for many people, is all they have. And that needs to be adjusted in a way that Social Security is solvent.

But for those who have more means, as the president said, they should be focusing on what's occurring to pensions, what's occurring to savings and what's occurring in the tax code that affect those savings for retirement purposes.

So, yes, I think it makes all kinds of sense to examine, as one of the areas, adjusting how much someone gets paid in Social Security if you create equity in your package that for those who don't rely totally on Social Security they get their concerns addressed as well. Our approach will be to examine the changing population, the aging population, and offer a program that addresses all aspects that need to be addressed under the federal government's jurisdiction, within the Ways and Means Committee's jurisdiction, that deal with retirement.

QUESTION: You also mentioned in January fundamental changes in taxes. And I gather that that will also be part of this. Would you elaborate on how the tax structure might be part of a package that addresses the retirement issue?

THOMAS: I would focus on your fundamental taxes. I didn't say "fundamental taxes." The president has a panel looking a fundamental reform in taxes. I said the tax code is something that can be looked at. And in a larger retirement package, adjustments could be made there for those people who don't necessarily rely primarily on Social Security, to give them some certainty, just as the president's proposal with Social Security will give young people and those on disability, widows, low-income -- and I might want to stress that for the Democrats, in all the years they were in the majority, they never, ever said that if you worked your entire life and your pension was Social Security that you should retire above poverty. They were the ones who kept those people in poverty.

We will accept the president's challenge, and we will make sure that someone who pays into Social Security their entire life will not retire in poverty.

QUESTION: If a bill is to make it out of the House, does it have to have private accounts financed by payroll tax revenues?

THOMAS: In 1992, I introduced a piece of legislation which was called Social Security IRAs. Because I thought, based upon the fight that occurred in the '80s and the direction that the majority wanted to go, to simply increase payroll taxes, wait until crises occurred, and then force solutions which were not permanent or long-term, that young people would be very pleased to see some kind of a document with their name on it and an accumulating amount that was theirs. So I heartily support the president's concept of having an account with your name on it, a personal account, if you will....

And personal accounts can take a number of forms. And we are going to examine all of those that have been offered, including members' bills who've been put in on the House and any that are on the Senate side and call in those who've offered from the private sector suggestions, and attempt to pick from those what we believe to be the best approach to deal with that in concert with the entire package that we'll be putting together, not just to address the troubles in Social Security, but to make sure that it is cohesive with the larger package which will contain Social Security, which is a retirement package for aging Americans....

QUESTION: If the House produces a piece of Social Security reform legislation that meets the president's principles, as you said, it's going to be an uncomfortable vote for members... why make members take the vote on a bill that includes benefit cuts, instead of allowing some compromise to be worked in the Senate and then moving forward?

THOMAS: You have just done what I hoped no one would do, with all due respect. You've jumped right back into the Social Security box and you've looked only at the pieces in the Social Security box. And you indicated one of the things that might be done would be an adjustment in benefits. There could be adjustment in percentage payout, there could be adjustment in aid, there could be any number of adjustments.

But I think I've said -- and I will repeat it -- that it won't just be a Social Security bill. It will be a retirement bill. And that members will look at the total package. And that one of the ways you're able to make law, let alone pass the House, is to provide a package in which people see something that they can support. And if you're looking for 100 percent support, that's rare. If you're looking for 100 percent opposition, I would hope that's rare.

And what the Democrats have tried to establish is that they are going to be 100 percent opposed, except for what they want. Our job is to build a package which should attract bipartisan support. My belief is it will. And my apologies to those Democrats who believe addressing Social Security and retirement in a more fundamental way is the way to go, because they are going to be pressured by the Democratic leadership to stay in lockstep and simply offer "no."

In 1983, the Democrats were bold enough to offer "raise the payroll taxes." So if there's any learning curve between 1983 and now, it is that the Democrats of 1983 voted to raise payroll taxes. Republicans stopped them from doing that. Today, Democrats don't offer raising the payroll tax. They don't offer any alternative. They're just "no."....

Because we are engaged, we will provide a permanent solution that adjusts Social Security to reflect the changes in the population. But since Social Security is essential to some people -- which we will protect -- but not essential to others, we will look for a solution on a broader scale than Social Security for aging Americans and their retirement needs.

And as my friend the chairman said, when you put this entire package together, I firmly believe colleagues on my side of the aisle will see things that they like and support the bill. And there will be colleagues on the other side of the aisle who clearly will things in the bill they like. And our only hope is they'll get a permission slip from the Democratic leadership to vote on it.

Thank you.