Later, live sunday starting at noon eastern on American History tv on cspan 3. Social security chief actuary steven goss recently testified on the current status of Social Security trust funds. He also discussed potential solutions for making sure the funds stay solvent. This house ways and means subcommittee hearing just under an hour. Good morning. We have decided that were going to start the hearing early. Since you all are here or since youre here, is that all right with you . Sounds just great. We all know Social Security provides important retirement and disability benefits that millions of americans rely on. Yet, as we will hear again today, Congress Needs to act so we can be sure that those benefits will be there for our children and our grandchildren just like they are for seniors and individuals with disabilities today. Today well hear from Social Security chief actuary about the findings in this years report, and while a report adds some good news for the Disability Insurance program, make no mistake, Social Security faces serious challenges. The Trustees Report tells us the Social Security trust funds will be exhausted in 2034. At that point, individuals face across the Board Benefit cuts if congress doesnt act. Once the trust funds are exhausted, Social Security will only be able to pay 77 of promised benefits. Thats wrong and simply unacceptable. The trustees also tell us today it would take 12. 5 trillion to make Social Security solvent over the next 75 years. Thats not a little number. And the number gets bigger every year. In 2011 when i first held a hearing on the Trustees Report, it was 6. 5 trillion. Fixing Social Security will require tough choices, choices that will affect the lives of millions of americans, and i can tell you they arent easy choices. We all may have differing views on how to solve it but not talking about the problem wont make it go away, and if we wait until the trust funds are exhausted, the choices become more difficult and more or some of the options wont be on the table any longer. Last december i introduced my plan to fix Social Security. My good friend from connecticut, mr. Larson, also has a plan, and i appreciate my friends recognition that Social Security is in trouble and we need to fix it. While our plans are very different, they both fix Social Security permanently. I believe any plan to fix Social Security should do so permanently. Social security is too important not to give workers and their families that certainty. Its not enough to just push out the trust fund exhaustion date by a few years. When congress acts, we need to be sure we finally got Social Security on the right track for good. In addition, to permanently fix the program, i believe Social Security solvency should meet the following principles. First, it should modernize Social Security to reflect todays workers and their families. Second, it should reward hard work. Third, it should protect the most vulnerable. And lastly, it should improve retirement security. Millions of americans rely on this Important Program now and millions more pay in with the expectation of future benefits. Congress has a responsibility to the American People to make sure that our children and grandchildren can count on Social Security just like seniors and individuals with disabilities do today. We need to take this responsibility seriously, and thats why this subcommittee will continue to talk about Social Security solvency and the cost of delay. Americans want, need and deserve nothing else. I recognize mr. Larson for his opening statements. Thank you, mr. Chairman, and we are in concurrence. We could give one anothers speeches i think at this particular excuse me, at this particular point. As we like to say often, congress should be about the vitality of ideas, and i commend the chairman because he has been a stalwart in making sure that we address this issue. In this, his last term in congress, were especially heartened by the fact of his determination to put forward legislation that will meet the test of the 75year requirement. While the news that we receive today is better than some might have expected, especially on the disability side, it does remain, as the chairman has pointed out, our desire and i believe that to be true of everybody on the committee to reach a conclusion where we make this solvent into the future for all generations. And to the chairmans point, we do have plans, competing but with the general concept in mind that we want to make Social Security solvent into the next century. We believe that we have to enhance Social Security along the way. We think its unacceptable that for many people, especially working women, that they retire into poverty. We think it unacceptable that our colas have been determined by a cpi that doesnt actually reflect what the real cost that the elderly incur are. We think it unacceptable that we havent really changed Social Security since 1983. Its an Insurance Program. Have any of your insurance premiums gone up since 1983 . Of course they have. And so we think that its vitally important to make sure, especially with the solvency, that we look at this and combine both the old age and retirement and disability together and then provide the actuarial say aial e to make sure the program is solvent. We believe to do that we have to increase the contribution to the fund. These are difficult choices, as mr. Johnson has indicated, but if you phase that in over 25 years, we would in essence be doing what should have been done in 83, index this in a way so that there was gradually as it kept pace with the actuarial concerns of the population of the modest increases that would be necessary. This takes us into well beyond the 75year period by following these adjustments, and also making clear that we need to enhance the program on behalf of so many beneficiaries. We also believe that many seniors who find themselves in the workforce deserve a tax break, and by indexing this appropriately from what was done in 1983 to, as mr. Johnson says, what needs to be done today to modernize it, we have a lot of talent on this committee and many individuals as we listen to some of the concerns of Social Security and my colleagues on the other side have been leaders in talking about the technological changes that will be needed that also could produce from antiquated systems that dont provide the best up to date information that we could have. So, i concur with the chairman. I thank him. Were looking forward to having a hearing on this where we are able to put the vitality of ideas to the test with both competing programs and what i hope will be a great solution for the American People. Thank you, mr. Chairman. Thank you, mr. Larson. I appreciate your comments. Some are swaggert, do you care to make a comment . I have a dozen questions. Why dont we wait until a dozen questions . Oh yeah. Well let you have two, hows that . As customary, any members are welcomed to submit a statement for the record before we move on to testimony today. I want to remind our witnesses to please limit your oral statement to five minutes. However, without objection, all the written testimony will be made part of the hearing. We have one witness today seated at the table, steven goss, chief actuary, Social Security administration. Mr. Goss, welcome to our hearing. Thank you for being here. Please proceed. Thanks very much, chairman johnson, members of the committee for the opportunity to come and talk to you again about the Social SecurityTrustees Report and the status of these trust funds. As you all know, the Social SecurityTrustees Reports have been coming out from the board of trustees every single year starting 1941 updating you on what the status of the program is and what our challenges are in the future to assure that the scheduled benefits will be able to be paid to all future generations on a timely basis and in full. This year we project the combined oesi and funds to deplete the reserves in 2034, at which point there would be continuing income coming in to pay about 75 of scheduled benefits. Not what is desired and were looking forward to fixing that. At that time in 2034, if no changes were made, we would be in a position where we would have 25 lower benefits, so the option really for changes in the future are either to enact changes that will lower benefits by a third, increase revenues to this program by about im sorry, lower benefits by 25 , increase revenues by about onethird or some combination of those two. The two most significant changes in this years report already alluded to by the chairman and Ranking Member are first of all on the di solvency follows from the bipartisan budget act of 2015, where we had the reallocation that moved us from 2016 out to 2022. Last years report gave us one more year and this years report taking us five more years out to 2028. The reason for this seemingly dramatic extension of five years, we have had continuing, ever since 2010, declining numbers of applications for disability not just for Social Security but also for s. S. I. In addition, weve had continuing to lower the incident rate, the percentage of people who could be applying for and receiving disability having fewer people actually declining numbers of beneficiaries under the g. I. Program since 2013. Numbers have actually been coming down. So, what were doing this year for our projections obviously accepting the reality of whats happened lately and projecting out from that on a somewhat more gradual basis, not the very next year but some applications will come right back up and take two, three, four years. What we have done, however, maintained the same incidence rate by the end of the tenyear period of the shortrange period. Thats up for review. Well have to monitor very closely what continues to happen. The overall problem of the g. I. Program, we have the completion date combined 2034. The program all by itself, survivors until 2035, the same as last year. We actually have higher reserve levels to about 2033. But, the actual deficit for the fiveyear period as a whole has risen from 2. 66 to 2. 83 of payroll. About a third of that [ inaudible ] some other things that have contributed to that are more recent data, lower birth rate, lower immigration rolls. Less death rate than even we have projected. Ever since 2009, the death rate has not [ inaudible ] a little change we might talk about more accepting a slightly lower level worker productivity for the future. I really do want to comment again because both the chairman and Ranking Member mentioned the real factor, the reason were having the increases in the Social Security is not disability anymore but in the retirement area, the baby boomers all moving up to the retirement age and replacing the work age by the lower birth rate [ inaudible ] finally i want to say once again it is really a pleasure working only with you but really your excellent staff. You all have amazing staff. I think how lucky you are on that but im sure you realize that and we look forward to working with you and them to assure benefits will continue for over the 6 million bin sh r beneficiaries we have now thank you, sir. I appreciate your testimony and well now turn to questions as is customary for each round of questions i will limit my time to five minutes and ask my colleagues to also limit their questioning time to five minutes, as well. The Disability Insurance trust fund sol vens see date shifting five years later some folks may think we dont need to talk about Social Security right now and can just wait. I want to make sure were all on the same page. Isnt it true that the longer we wait, the harder it gets . Chairman johnson, you are entirely correct. The one thing we i think you alluded to at least some of it, a perfect example was the 1983 amendment, the last major change we had, one of the big factors was increasing the normal retirement age. That was implemented with a 17year delay. So, if we enact something relatively soon, even if not implemented into the future, that gives the people who will be affected lots of advance warning, which is a really good thing. It also has many more options to be considered if we wait until the last minute and allows phasein of changes more quickly. It is all good, enacting sooner, even if there is [ inaudible ] thank you, mr. Goss. One of the big headlines from yesterdays report is the Disability Insurance trust Fund Solvency date doubling the programs years of solvency seems like a big change. How confident are you that we arent just going to lose this additional solvency a few years from now . Well, theres no question theres a risk of that but our estimate at this point, we would say were about equally likely to have the solvency base extend further as come back. The tricky part of the Disability Insurance trust fund at this point we have a relatively low trust fund reserve and also our revenue income even after past the tax rate reallocation compared to our costs are pretty close together so any significant fluctuation in either one of those could cause this sooner or later. But at this point based on the data we have, the extension looks pretty solid and if anything the applications stay anywhere near as where theyve been lately we might well have a greater extension and might have to change our rate going into the future. But, time will tell. We just wish we had the [ inaudible ] well, thank you. We often hear that if we just raise Social Security tax, itll solve all Social Securitys problems. But, its important for folks to understand the facts. Social security earning up to a certain amount called the taxable maximum are subject to payroll taxes. Whats the taxable maximum this year . For this year, 127, 200. If the taxable maximum were raised to govern 90 of earnings what the taxable maximum be this year. About double that, right around 250,000, just a little bit less. Suggested we should get rid of the taxable maximum and, instead, subject all earnings to payroll tax. Mr. Goss, if all earnings were subject to payroll tax, would Social Security be solvent . It would be solvent longer. It would not be solvent okay. The answer is no. At what point would costs once again exceed income . Uh, if we were to enact a change with no if we were to enact a change with no, uh, benefit credit for the extra, we would actually solve about 80 of the longterm and we would be good to well into the 2060s for the solvency. 20 what . Into the 2060s. Really . Im sorry. If we did no benefit credit at all and taxed all income, our solvency date would move from 2034 to [ inaudible ]. If we give benefit credits and taxed all earnings and include in our computation benefits earnings that were going to be taxed we would extend the solvency date out to 2067. 20 what. 2067. Yeah. I was told 2026. Pardon . I was told 2026. Oh. 2026 was the would be the date at which the annual income would then start to fall beyond the outgo but we would still have significant reserves at that point that would carry us for solvency purposes. On a cash flow basis, the point at which income would again fall below our cost of paying all the benefits the income would reduce to where it wouldnt cover what were doing. Right. Current income would not be we would have to be drawing on reserves. So, even if we get completely rid of the taxable maximum, the program will be running cash flow deficits within the next decade. Is that true . Uh, thats correct. That sure doesnt get us much and as ive said before, we clearly cant tax our way to solvency. Mr. Larson, do you care to comment . Thank you, mr. Chairman. Thank you, mr. Goss. Usually when i go out to do town halls i carry with me two things, the actuary report on the bill we submitted and a starbucks and i do so to make a point. The first point i make to people and i think you can confirm this, Social Security is an Insurance Plan. Its not an entitlement. Its an Insurance Plan. Its an Insurance Plan that you are assessed through fica. Fica is the federal insurance contribution act. Whose contribution . Yours. The last time insurance premiums went up in Social Security was in 1983. Is that correct . Uh, thats correct. So, has anyone in this audience or anywhere in the countrys insurance not gone up an actuarial assumption since 1983 . And the answer, of course, is theyve gone up keeping pace with the assumptions and changes ongoing, except for Social Security. So, had i believe our predecessors indexed the system appropriately, we wouldnt be having this discussion. It would have been taking care of itself incrementally. So, i as i go out to these town halls and youve done the analysis on our bills, can you confirm our bill doesnt have any cuts in terms of peoples benefits . Thats correct. In fact,