Order Code IB98048
CRS Issue Brief for Congress
Received through the CRS Web
Social Security Reform
Updated October 27, 2004
Dawn Nuschler
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
The Basic Debate
The Push for Major Reform
The Arguments for Retaining the Existing System
The Basic Choices
Specific Areas of Contention
The System’s Financial Outlook
Public Confidence
Increasing Doubts About Money’s Worth
“Privatization” Debate
The Retirement Age Issue
Cost-of-Living Adjustments (COLAs)
Social Security and the Budget
Reform Initiatives
Reform Bills in Recent Congresses
Legislation in 107th Congress
Legislation in the 108th Congress
LEGISLATION

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Social Security Reform
SUMMARY
Although the Social Security system is
Security can meet its long-term commitments.
now running surpluses of income over outgo,
There also is a growing perception that Social
its board of trustees projects that its trust
Security may not be as good a value in the
funds would be depleted in 2042 and only
future. These concerns and a belief that the
73% of its benefits would be payable then
nation must increase its national savings have
with incoming receipts. The trustees project
led to proposals to revamp the system.
that on average the system’s cost would be
14% higher than its income over the next 75
Others suggest that the system’s prob-
years; by 2080 it would be 45% higher. The
lems are not as serious as its critics claim.
primary reason is demographic: the post-
They argue that it is now running surpluses,
World War II baby boomers will begin retiring
that the public still likes it, and that there is
in less than a decade and life expectancy is
risk in some of the new reform ideas. They
rising. Between 2000 and 2025 the number of
contend that only modest changes are needed.
people age 65 and older is predicted to grow
by 76%. In contrast, the number of workers
Today, the ideas range from restoring
supporting the system would grow by 17%.
solvency with minimal changes to scrapping
the system entirely for something modeled
The trustees project that Social Security’s
after IRAs or 401(k)s. This broad spectrum
surplus of taxes and interest will cause the
was clearly reflected in the report of a 1997
system’s trust funds, comprised exclusively of
Social Security Advisory Council. Three very
federal bonds, to grow to a peak of $6.6 tril-
different plans were presented, none of which
lion in 2027. The system’s outgo thereafter
received a majority’s endorsement. Similar
would exceed its income and the trust funds
diversity is reflected in the many reform bills
would be drawn down until their depletion.
introduced in the 105th, 106th, 107th, and 108th
However, the trustees project that the system’s
Congresses. In his last three years in office,
taxes by themselves would fall below its
former President Clinton also highlighted the
outgo beginning in 2018. At that point, other
issue. He proposed using the Social Security
federal receipts would be needed to help pay
portion of then-projected budget surpluses to
for benefits (by providing cash as the federal
buy down the federal debt while crediting the
bonds held by the trust funds are redeemed).
system with the reductions — what effectively
If there are no other surplus governmental
would be general fund infusions to the system.
receipts, policymakers would have three
choices: raise taxes or other income, cut
In May 2001, President Bush appointed
spending, or borrow the money.
a commission to make recommendations to
reform Social Security. The commission
This adverse outlook is reflected in
issued a report in December 2001 that includ-
public opinion polls showing that fewer than
es three options to reform the program. All
50% of respondents are confident that Social
options feature individual accounts.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
In May 2001, President Bush appointed a commission to make recommendations to
reform Social Security. The commission issued a report in December 2001 that presents
three options to reform the program. All three feature individual accounts. In the 107th
Congress, Representatives DeMint, Kolbe, Matsui, Petri, Sessions, Shaw, Nick Smith and
Stenholm, and Senator Gramm, introduced bills that would have established personal
accounts to supplement or replace part of the Social Security system. Representative
Matsui’s bills would have enacted options 1, 2, and 3, respectively, of the President’s
Commission. Representatives Matsui and Shows also introduced bills that would have
rejected proposals that would substitute traditional Social Security benefits with personal
accounts. In the 108th Congress, Representatives Shaw, Smith, DeMint and Kolbe
reintroduced their reform proposals in slightly modified forms (H.R. 75, H.R. 3055, H.R.
3177 and H.R. 3821, respectively). In addition, Representatives Paul Ryan, Sam Johnson
and David Obey and Senators Lindsey Graham and John Sununu introduced Social Security
reform proposals (H.R. 4851, H.R. 4895, H.R. 5179, S. 1878 and S. 2782, respectively).
Senator Corzine introduced a resolution (S.Res. 432) that expresses the sense of the Senate
that Congress should reject Social Security privatization proposals.
BACKGROUND AND ANALYSIS
Although Social Security’s income is currently exceeding outgo, its board of trustees
(three officers of the President’s Cabinet, the Commissioner of Social Security, and two
members representing the public) projects that on average over the next 75 years Social
Security’s outgo will exceed income by 14% and by 2042 its trust funds would be depleted.
At that point, revenues would pay for only 73% of program costs. The primary reason is
demographic: the post-World War II baby boom generation will be retiring soon and
increasing life expectancy is creating an older society. Between 2000 and 2025, the number
of people age 65 and older is predicted to rise by 76%, while the number of workers whose
taxes will finance future benefits is projected to grow by only 17%. As a result, the number
of workers supporting each recipient is projected to fall from 3.3 today to 2.3 in 2025.
Social Security revenues are paid into the U.S. Treasury and most of the proceeds are
used to pay for benefits. Surplus revenue is invested in federal securities recorded to the Old
Age, Survivors, and Disability Insurance (OASDI, the formal name for Social Security) trust
funds maintained by the Treasury Department. Social Security benefits and administrative
costs are paid out of the Treasury and a corresponding amount of trust fund securities are
redeemed. Whenever current Social Security taxes are insufficient to pay benefits, the trust
fund’s securities are redeemed and Treasury makes up the difference with other receipts.
Currently, Social Security tax revenues exceed what is needed to pay benefits. These
surpluses and the interest the government “pays” to the trust funds appear as growing trust
fund balances. The trustees project that the balances will grow to $6.6 trillion in 2027, after
which the system’s outgo would exceed its income and the balances would fall. By 2042,
the trust funds would be exhausted and technically insolvent. The point at which Social
Security taxes alone (ignoring interest paid to the funds) would fall below the system’s outgo
is 2018. Since interest paid to the funds is an exchange of credits between Treasury accounts
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and not a resource for the government, in 2018 other federal receipts would be needed to help
meet the system’s costs. At that point, policymakers would have three choices: raise taxes,
cut spending, or borrow the needed money. The annual draw from the general fund (in 2004
dollars) is projected to be $56 billion by 2020, and $256 billion by 2030.
Today, the annual cost of the system ($500 billion) is equal to 11.07% of workers’ pay
subject to Social Security taxation (or taxable payroll). It is projected to rise slowly over the
next decade, reaching 11.76% of payroll in 2013. It would then rise more precipitously to
15.56% in 2025 and 17.56% in 2035, as the baby boomers retire. Afterward, the system’s
cost would rise slowly to 19.39% of payroll in 2080. The system’s average cost over the
entire period (2004-2078) would be 15.73% of payroll, or 14% higher than its average
income. However, the gap between income and outgo would grow throughout the period and
by 2080, income would equal 13.39% of payroll, outgo would equal 19.39% of payroll, and
the gap would equal 6% of payroll. By 2080, outgo would exceed income by 45%.
This adverse outlook is mirrored in public opinion polls that show that fewer than 50%
of respondents express confidence that Social Security can meet its long-term commitments.
This skepticism is reinforced by a growing perception that Social Security may not be as
good a value in the future. Until recent years, retirees could expect to receive more in
benefits than they paid in Social Security taxes. However, because Social Security tax rates
have increased to cover the costs of a maturing “pay-as you-go” system, these ratios have
become less favorable. Such concerns and a belief that the nation must increase national
savings to meet the needs of an increasingly elderly society have led to reform proposals.
Others suggest that the issues confronting the system are not as serious as sometimes
portrayed. They point out that there is no imminent crisis, that the system is now running
surpluses and is projected to do so for two decades or more, that the public still likes the
program, and that there is considerable risk in some of the new reform ideas. They contend
that modest changes could resolve the long-range funding problem.
The Basic Debate
The current problem is not unprecedented. In 1977 and 1983, Congress enacted a
variety of measures to address similar financial problems. Among them were constraints on
the growth of initial benefit levels, a gradual increase from 65 to 67 in Social Security’s full
retirement age (i.e., the age for receipt of full benefits), payroll tax increases, taxation of
Social Security benefits of higher-income recipients, and extension of coverage to federal and
nonprofit workers. Subsequently, new long-term deficits have been forecast, resulting from
changes in actuarial methods and assumptions, and from the passage of time (during which
years of deficits at the end of the 75-year valuation period replace recent years of surpluses).
Many believe that action should be taken soon. This has been the view of the Social
Security trustees and other recent panels and commissions that have examined the problem,
and was echoed by a wide range of interest groups testifying in hearings during the past two
Congresses. One of the difficulties is that there is no sense of “near-term” crisis. In 1977
and 1983, the trust funds’ balances were projected to fall to zero in a very short time (within
months of the 1983 rescue). Today, the problem is perceived to be as few as 14 or as many
as 38 years away. Lacking a “crisis,” the pressure to compromise is diffused and the issues
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and the divergent views about them have led to myriad complex proposals. In 1977 and
1983, the debate was not about fundamental reform; it revolved around how to raise the
system’s income and constrain its costs. Today, the ideas range from restoring the system’s
solvency with as few alterations as possible to replacing it entirely with something modeled
after IRAs or 401(k)s. This broad spectrum was clearly reflected in the Social Security
Advisory Council’s report in 1997, which presented three different reform plans, none of
which garnered a majority of the council’s 13 members. Similar diversity is reflected in the
many Social Security reform bills introduced in the past two Congresses.
The Push for Major Reform. Many advocates of reform see Social Security as an
anachronism, built on depression-era concerns about high unemployment and widespread
“dependency” among the aged. They see the prospect of reform today as an opportunity to
modernize the way society saves for retirement. They cite the vast economic, social, and
demographic changes that have transpired over the past 68 years and changes made in other
countries that now use market-based personal accounts to strengthen retirement incomes and
bolster their economies by spurring savings and investments. They believe government-run,
pay-as-you-go systems are unsustainable in aging societies. They prefer a system that lets
workers acquire wealth and provide for their retirement by investing in personal accounts.
They also see it as a way to counter skepticism about the current system by giving
workers a greater sense of ownership of their retirement savings. They contend that private
investments would yield larger retirement incomes because stocks and bonds have provided
higher returns than are projected from the current system. Some feel that personal accounts
would correct what they see as Social Security’s contradictory mix of insurance and social
welfare goals, that is, its benefits are not based strictly on a person’s contributions, yet
because it is not means-tested, many of its social benefits go to well-to-do recipients. Others
argue that creating a system of personal accounts would prevent the government from using
surplus Social Security taxes to “mask” government borrowing or other spending.
Others, not necessarily seeking a new system, see enactment of long-range Social
Security constraints as one element of curbing federal entitlement spending. The aging of
society means that the costs of the entitlement programs that aid the elderly will increase
greatly in the future. The costs of the largest entitlement programs, Social Security,
Medicare, and Medicaid, are directly linked to an aging population. Proponents of imposing
constraints on them fear that, if left unchecked, their costs would place a large strain on the
federal treasury far into the future, consuming resources that could be used for other priorities
and forcing future generations to bear a much higher tax burden.
Some contend that action is needed now as a matter of fairness. They point out that
many of today’s recipients get back more than they paid in Social Security taxes and far more
than the baby boom generation will receive. They argue that to put off making changes is
unfair to today’s workers, who not only must pay for “transfer” payments that they
characterize as “overgenerous” and unrelated to actual need, but also have the prospect that
their own benefits will have to be scaled back severely. Others emphasize the trustees’
adverse outlook and contend that steps need to be taken today (raising Social Security’s full-
benefit retirement age, constraining its future benefit growth, cutting COLAs, raising taxes,
etc.) so that whatever is done to bring the system into balance can be phased in, giving
workers time to adjust retirement expectations to reflect what these programs will be able to
provide. Waiting, they fear, would require abrupt changes in taxes and benefits.
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The Arguments for Retaining the Existing System. Those who favor a more
restrained approach argue that its problems are resolvable with modest tax and spending
changes and that the program’s critics are raising the specter that Social Security will
“bankrupt the Nation” in order to undermine public support and to provide an excuse to
privatize it. They contend that personal savings accounts would erode the social insurance
nature of the current system that favors low-income workers, survivors, and the disabled.
Others are concerned that switching to a new system of personal accounts would pose
large transitional problems by requiring today’s younger workers to save for their own
retirement while paying taxes to cover current retirees’ benefits. Some doubt that it would
increase national savings, arguing that higher government debt (from the diversion of current
payroll taxes to new personal accounts) would offset the increased personal account savings.
They also contend that the capital markets’ inflow created by the accounts would make the
markets difficult to regulate and potentially distort equity valuations. They point out that
some of the other countries who have moved to personal accounts did so to create capital
markets. Such markets, they argue, are already well developed in the United States.
Some argue that a system of personal accounts would expose participants to excessive
market risk for an income source that has become so essential to many of the nation’s elderly.
They contend that the nation now has a three-tiered retirement system — consisting of Social
Security, private pensions, and personal assets — that already has private saving and
investment components. They contend that while people may want and be able to undertake
some “risk” in the latter two tiers, Social Security — as the tier that provides a basic floor
of protection — should be more stable. They further contend that the administrative costs
of maintaining personal accounts could be very large and significantly erode their value.
Some say that concerns about growing entitlements are overblown, arguing that as
people live longer, they will work longer as labor markets tighten and employers offer
inducements for them to remain on the job. Moreover, a more liberal immigration policy
could be used as a way to increase the labor force, if desired. They argue that the projected
low ratio of workers to dependents is not unprecedented; it existed when the baby boomers
were in their youth. They point out that the baby boomers are now in their prime working
and saving years and contend that the nation’s savings rate will rise as the boomers age.
The Basic Choices. There are many options. The three alternatives offered by the
1994-1996 Social Security Advisory Council show that the range of choices is wide:
maintaining the current system as much as possible; reducing its future commitments while
mandating that workers save more on their own; and totally restructuring Social Security to
incorporate a large personal account component. Although there is a consensus that action
needs to be taken soon, there is uncertainty about what should be done and how quickly a
consensus plan can be forged.
Specific Areas of Contention
The System’s Financial Outlook. There are conflicting views about the severity
of Social Security’s looming financial shortfall. Some argue that the problem is more acute
than has been traditionally portrayed, for example, an average 75-year deficit of 14% (or
1.89% of taxable payroll). They believe their argument has been buttressed by a new
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portrayal in the most recent Trustees report that shows that, if projections are made beyond
the 75-year window, the status of the program is even more dire (e.g., instead of 1.89% of
taxable payroll over the next 75 years, the long-range deficit looking indefinitely into the
future would be 3.5% of taxable payroll). They also point out that the system’s costs are
projected to exceed its receipts by 3.62% of taxable payroll in 2030, a difference of 27%.
In 2080, the gap would be 6% of taxable payroll, a difference of 45%. Thus, on a pay-as-
you-go basis, the system would need a lot more than a 14% change in taxes or expenditures
over the next 75 years to be able to meet its promises. They contend that thinking the
problem is 38 years away (because the trust funds would not be depleted until 2042) ignores
the financial pressure Social Security will exert on the government when expenditures
exceed taxes beginning in 2018. At that point the government would have to use other
resources to help pay the benefits, resources that would otherwise be used to finance other
governmental functions.
Others express concern that the problem is being exaggerated. First, they argue that in
contrast to earlier episodes of financial distress, the system has no immediate problem.
Surplus tax receipts are projected for 14 years and the trust funds are projected to have a
balance for 38 years. They contend that projections for the next 75 years, let alone the
indefinite future, cannot be viewed with any significant degree of confidence and Congress
should respond to them cautiously. They argue that even if the 75-year projections hold, the
average imbalance could be eliminated by simply increasing the payroll tax rate immediately
by 0.95 percentage points on both employees and employers. They point out that as a share
of GDP, the projections show the system’s cost rising from only 4.33% today to 6.31% in
2030. While acknowledging that this would be a notably larger share of GDP, they argue
that GDP itself would have risen substantially in real terms. Moreover, while the ratio of
workers to recipients is projected to decline, they contend that employers are likely to
respond with inducements for older workers to stay on the job longer. Phased-in retirements
already are becoming more prevalent, and older workers are increasingly seeing retirement
as something other than an all-or-nothing decision.
The preceding discussion of the system’s long-range financial outlook reflects the
intermediate projections of the Social Security Board of Trustees. Projections released by
the Congressional Budget Office (CBO) provide a somewhat more favorable long-range
outlook for the Social Security system. In its report, The Outlook for Social Security, CBO
projects that the Social Security system will begin running cash flow deficits in 2019 (1 year
later than projected by the trustees) and that the trust funds will be depleted in 2052 (10 years
later than projected by the trustees). At that point, an estimated 80% of promised benefits
would be payable. Overall, CBO projects that the system’s average 75-year actuarial deficit
will be equal to 1.00% of taxable payroll, compared to 1.89% under the trustees’ latest
projections (a difference of 47%). In terms of Social Security’s size relative to the economy,
CBO projects that, by 2080, outlays will be equal to 6.7% of GDP (compared to 6.6%
projected by the trustees) and revenues will be equal to 4.9% of GDP (compared to 4.6%
projected by the trustees). CBO attributes the differences between its projections and the
trustees’ projections to the use of different economic assumptions and methodology. Despite
the differences, however, CBO notes that the basic conclusion is the same — “under current
law, the program will generate a sustained and significant demand for budgetary resources”
[page 29]. The CBO report may be accessed at [http://www.cbo.gov/showdoc.cfm?index
=5530&sequence=0&from=7].
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Public Confidence. Polls in recent years show that a majority of Americans have
a low level of confidence in the Social Security program. Although skepticism abated
following legislation in 1983 that shored up the system, it has risen again with more than half
of the public now expressing a lack of confidence. Younger workers are particularly
skeptical; nearly two-thirds of those below age 55 express little confidence compared to less
than one-third of those age 55 and older.
Some observers caution about inferring too much from polling data, noting that public
understanding of Social Security is limited and often inaccurate. They argue that a major
reason confidence is highest among older persons is that, being more immediately affected,
they have learned more about the program. Younger workers receive little information about
Social Security unless they request it, which very few do. In 1995, the Social Security
Administration began phasing in a system to provide annual statements to workers, which
some argue will make workers more aware of their promised benefits and thus more trusting
of the system. Others, however, suggest the skepticism is justified by the system’s repeated
financial difficulties and its diminished “money’s worth” to younger workers. Notably, in
recent polls, reform of Social Security ranked high as a legislative priority.
Increasing Doubts About Money’s Worth. Until recent years, Social Security
recipients received more, often far more, than the value of the Social Security taxes they
paid. However, because Social Security tax rates have increased over the years and the age
for full benefits is scheduled to rise, it is becoming increasingly apparent that Social Security
will be less of a good deal for many future recipients. For example, for workers who earned
average wages and retired in 1980 at age 65, it took 2.8 years to recover the value of the
retirement portion of the combined employee and employer shares of their Social Security
taxes plus interest. For their counterparts who retired at age 65 in 2003, it will take 17.4
years. For those retiring in 2020, it will take 21.6 years (based on the trustees’ 2003
intermediate forecast). Some observers feel these discrepancies are grossly inequitable and
cite them as evidence that the system needs to be substantially restructured.
Others discount this phenomenon, arguing that Social Security is a social insurance
program serving social ends that transcend questions of whether some individuals do better
than others. For example, the program’s anti-poverty features replace a higher proportion
of earnings for low-paid workers and provide additional benefits for workers with families.
Also, today’s workers who will receive less direct value from their taxes than today’s
retirees, have in large part been relieved from having to support their parents, and the elderly
are able to live independently and with dignity. These observers contend that the value of
these aspects of the system is not reflected in simple comparisons of taxes and benefits.
“Privatization” Debate. Social Security’s financing problems, skepticism about its
survival, and a belief that economic growth could be bolstered through increased savings
have led to a number of proposals to “privatize” part or all of the system, reviving a
philosophical debate that dates back to its creation in 1935. All three alternative plans of the
1996 Advisory Council featured program involvement in the financial markets. The first
called upon Congress to consider authorizing investment of part of the Social Security trust
funds in equities (on the assumption that stocks would produce a higher return to the system).
The second would require workers to contribute an extra 1.6% of their pay to new personal
accounts to make up for Social Security benefit cuts it called for to restore the system’s long-
range solvency. The third would redesign the system by gradually replacing Social Security
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retirement benefits with flat-rate benefits based on length of service and personal accounts
(funded with 5 percentage points of the current Social Security tax rate).
The reform that Chile enacted in 1981, which replaced a troubled pay-as-you-go system
with one requiring workers to invest part of their earnings in personal accounts through
government-approved pension funds, has been reflected in a number of reform bills
introduced in recent Congresses. They would permit or require that workers invest some or
all of their Social Security tax into personal accounts. Most call for future Social Security
benefits to be reduced or forfeited. Likewise, the three options presented by President Bush’s
commission would allow workers to choose to participate in individual accounts and would
reduce their eventual Social Security benefit by the projected value of the account.
Still another approach is reflected in bills that would require that future budget surpluses
be used to finance personal accounts to supplement Social Security benefits for those who
pay Social Security taxes. Former President Clinton’s January 1999 reform plan would have
allocated a portion of the surpluses to personal accounts supplemented by a worker’s own
contributions and a government match (scaled to income). Another part of his plan called
for the diversion of a portion of budget surpluses or the interest savings resulting therefrom
to the Social Security trust funds, some of which would be used to acquire stocks, similar to
the approach suggested in the one of the Advisory Council’s plans and in some recent bills.
Most of these approaches require that a new independent board would invest some of these
new funds in stock or corporate bonds and the rest in federal securities.
Many personal accounts proponents see them as a way to reduce future financial
demands on government and to reassure workers by giving them a sense of ownership of
their retirement savings. Others feel that it would enhance workers’ retirement income
because stocks and bonds generally have provided higher rates of return than are projected
from Social Security. In concert with this, they argue it would increase national savings and
promote economic growth. Some feel it would correct what they see as Social Security’s
contradictory mix of insurance and social welfare goals — that its benefits are not based
strictly on the level of a person’s contributions, yet many of its social benefits go to well-to-
do recipients. Others argue that it would prevent the government from using surplus Social
Security revenues to “mask” public borrowing or for other spending or tax cuts. Generally,
proponents of personal accounts fear that investing the Social Security trust funds in the
markets would concentrate too much economic power in a government-appointed board.
Opponents of personal accounts argue that Social Security’s problems can be solved
without altering the program’s fundamental nature. They fear that replacing Social Security
with personal accounts would erode the social insurance aspects of the system that favor low-
wage earners, survivors and the disabled. Others are concerned that it would pose large
transition problems by requiring today’s younger workers to save for their own retirement
while simultaneously paying taxes to support current retirees, and would further exacerbate
current budget deficits. Some doubt that it would increase national savings, arguing that any
increase in private savings would be offset by more borrowing by the government. They also
fear that the investment pool created by the accounts could be difficult to regulate and could
distort capital markets and equity valuations. Still others argue that it would expose
participants to excessive market risk for something as essential as core retirement benefits
and, unlike Social Security, would provide poor protection against inflation. Many prefer
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“collective” investment of the Social Security trust funds in the markets to potentially bolster
their returns and spread the risks of poor performance broadly.
The Retirement Age Issue. Raising the Social Security retirement age is often
considered as a way to help restore the system’s solvency. Much of the growth in Social
Security’s costs is a result of rising life expectancy. From 1940, when benefits were first
paid, the life expectancy for 65-year-old men and women has risen from 12.7 and 14.7 years
to 16.7 and 19.5 years, respectively, and by 2030 it is projected to be 18.4 and 21.2 years,
respectively. This trend bolstered arguments for increasing Social Security’s full benefit age
as a way to achieve savings when the system was facing major financial problems in the early
1980s. Congress boosted the “full benefit” age from 65 to 67 as part of the Social Security
Amendments of 1983 (P.L. 98-21). This change is being phased in starting with those born
in 1938, with the full two-year hike affecting those born after 1959. It will not raise the first
age of eligibility, now age 62, but the benefit reduction for retiring at 62 will rise from 20%
to 30%. Proponents of raising one or both of these ages further see it as reasonable in light
of past and projected increased longevity. Opponents say it will penalize workers who
already get a worse deal from Social Security than do current retirees, those who work in
arduous occupations, and racial minorities and others who have shorter life expectancies.
Cost-of-Living Adjustments (COLAs). Social Security benefits are adjusted
annually to reflect inflation. Social Security accounts for 80% of the federal spending on
COLAs. These COLAs are based upon the Bureau of Labor Statistics’ (BLS) Consumer
Price Index (CPI), which measures price increases for selected goods and services. In recent
years the CPI has been criticized for overstating the effects of inflation, primarily because
the index’s market basket of goods and services was not revised regularly to reflect changes
in consumer buying habits or improvements in quality. A BLS analysis in 1993 found that
the annual overstatement might be as much as 0.6 percentage points. CBO estimated in 1994
that the overstatement ranged from 0.2 to 0.8 percentage points. A 1996 panel that studied
the issue for the Senate Finance Committee argued that it might be 1.1 percentage points.
In response to its own analysis as well as the outside criticisms, the BLS has since made
various revisions to the CPI. To some extent, these revisions may account for part of the
slower CPI growth seen in recent years. However, calls for adjustments continue. According
to SSA’s actuaries, a COLA reduction of 1 percentage point annually would eliminate almost
four-fifths of Social Security’s long-range deficit (based on the trustees’ 2003 intermediate
forecast). While some view further CPI changes as necessary to help keep Social Security
and other entitlement expenditures under control, others contend that such changes are just
a backdoor way of cutting benefits. They argue that the market basket of goods and services
purchased by the elderly is different from that of the general population around whom the
CPI is constructed. It is more heavily weighted with healthcare expenditures, which rise
notably faster than the overall CPI, and thus they contend that the cost of living for the
elderly is higher than reflected by the CPI.
Social Security and the Budget. By law, Social Security is considered to be “off
budget” for many aspects of developing and enforcing annual budget goals. However, it is
still a federal program and its income and outgo helps to shape the year-to-year financial
condition of the government. As a result, policymakers often focus on “unified” or overall
budget figures that include Social Security. When President Clinton urged that future unified
budget surpluses be reserved until Social Security’s problems were resolved, and proposed
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using a portion of the surpluses to shore up the system, Social Security’s budget treatment
became a major issue. Congressional views about what to do with the surpluses are diverse,
ranging from “buying down” publicly-held federal debt to cutting taxes to increasing
spending. However, support for setting aside a portion equal to the annual Social Security
trust fund surpluses is substantial and has made Social Security reform a place holder in
much of the fiscal policy debate. The 106th Congress passed budget resolutions for FY2000
and FY2001 that incorporated budget totals setting Social Security surpluses aside pending
consideration of reform legislation. It went on to consider, but did not pass, additional “lock
box” measures intended to create procedural obstacles for bills that would divert these set
asides for tax cuts or spending increases. Similar legislation in the 107th Congress, H.R. 2,
was passed by the House in February 2001.
In 1998, the House Republican leadership attempted to define the use of the budget
surpluses with passage of H.R. 4579, which would have created a new Treasury account to
which 90% of the next 11 years’ projected surpluses would be credited. The underlying
principle was that 10% of the budget surpluses would be used for tax cuts and the remainder
held in abeyance until Social Security reforms were enacted. However, the bill was heavily
opposed by Democratic Members, who argued for holding 100% of the surpluses in
abeyance, and the Senate did not take up the measure before the 105th Congress adjourned.
Earlier in the 105th Congress, Social Security became an issue in consideration of a
constitutional amendment to require a balanced federal budget. The amendment (H.J.Res.
1 and S.J.Res. 1) would have included Social Security in the budget calculations, as did
similar measures considered in 1995 and 1996. Opponents of including Social Security
argued that it would cause the program’s surpluses to be used to cover deficits in the rest of
the budget and could lead to future cuts in Social Security benefits. Those who wanted to
keep it in the calculations argued that it was not their purpose to cut Social Security, but that
the program represented too large a share of federal revenues and expenditures to be ignored
and that removing it from the calculations would make the goal of achieving a balanced
budget much more difficult. On each occasion, critics of the amendment attempted to
remove Social Security from the calculations. While these attempts failed, the balanced
budget amendment itself failed each time to get the requisite votes in the Senate.
Reform Initiatives
Although the 1994-96 Social Security Advisory Council could not reach a consensus
on a single plan, its 1997 report contained three different approaches to restore the system’s
solvency. The first (the “maintain benefits” plan) would keep the system’s benefit structure
essentially intact by increasing revenue (including an eventual rise in the payroll tax) and
making minor benefit cuts. Its proponents also suggested that part of the Social Security trust
funds be invested in stocks. The second (the “individual account” plan) addressed the
problem mostly with benefit reductions, and in addition would require workers to make an
extra 1.6% of pay contribution to new personal accounts. The third (the “personal security
account” plan) proposed a major redesign of the system that would gradually replace the
current earnings-related retirement benefit with a flat-rate benefit based on length of service
and establish personal accounts funded by diverting to them 5 percentage points of the
current payroll tax. It would cover transition costs with an increase in payroll taxes of
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1.52% of pay and government borrowing. The conceptual approaches reflected in the
Council’s plans can be found in many reform bills introduced in recent Congresses.
In his last three years in office, former President Clinton repeatedly called for using
Social Security’s share of looming budget surpluses to reduce publicly-held federal debt and
crediting the trust funds for the reduction. In his 1999 State of the Union message, he
proposed crediting $2.8 trillion of some $4.9 trillion in budget surpluses projected for the
next 15 years to the trust funds — nearly $.6 trillion was to be invested in stocks, the rest in
federal securities. The plan was estimated to keep the system solvent until 2059. Critics
raised concerns that it was crediting Social Security’s trust funds twice for its surpluses and
that the plan would lead to Government ownership of private companies, which they argued
ran counter to the nation’s free enterprise system. Clinton further proposed that $.5 trillion
of the budget surpluses be used to create new Universal Savings Accounts (USAs) —
401(k)-like accounts intended to supplement Social Security. In June 1999, he revised his
plan by calling for general fund infusions to the trust funds equal to the interest savings
achieved by using Social Security’s share of the budget surpluses to reduce federal debt. The
infusions were to be invested in stocks until the stock portion of the trust funds’ holdings
reached 15%. In October 1999, he revised the plan again by dropping the stock investment
idea — all the infusions were to be invested in federal bonds. His last plan, offered in
January 2000, was similar but again called for investing up to 15% of the trust funds in stock.
In May 2001, President Bush appointed a commission to make recommendations to
reform Social Security. As principles for reform, the President stated that it must preserve
the benefits of current retirees and older workers, return Social Security to a firm financial
footing, and allow younger workers to invest in personal savings accounts. The commission
issued a final report on December 21, 2001, which includes three reform options. Each
option would allow workers to participate in voluntary personal accounts and reduce their
eventual Social Security benefit by the projected value of the account. The first option would
allow workers to divert 2% of taxable earnings to these accounts, but would make no other
changes. The second option would allow workers to divert 4% of taxable earnings, up to an
annual maximum of $1,000; reduce future benefits by indexing their growth to prices rather
than wages; and increase benefits to low-paid workers and widow(er)s. The third option
would allow workers to contribute an additional 1% of taxable earnings and receive a
government match of 2.5% up to an annual maximum of $1,000; reduce future benefits by
indexing their growth to increases in longevity and, for high-paid workers, by modifying the
benefit formula; and increase benefits for low-paid workers and widow(er)s.
Reform Bills in Recent Congresses. A large number of reform bills have been
introduced in the past several Congresses. During the 103rd Congress, four bills sought a mix
of benefit reductions and tax hikes, including raising the full benefit age to 70, reducing
COLAs, and other benefit reductions. In the 104th Congress, three more proposals not only
encompassed some of these changes, but also sought to privatize a portion of the program.
Major reform proposals burgeoned in the 105th and 106th Congresses. In the 105th Congress,
ten bills designed to reform Social Security using personal accounts also were introduced.
(For a description of these bills, see CRS Report 98-750, Social Security Reform: Bills in the
105th Congress and Other Proposals.)
In the 106th Congress, the most numerous Social Security bills introduced would alter
the program’s budget treatment or create budget “lock boxes,” mentioned earlier. More than
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40 bills fell into this category. A second group would have addressed the system’s problems
directly with some combination of benefit restraints and income-producing measures. Many
also would have made some use of the nation’s financial markets, either by creating new
personal savings accounts to supplement or take the place of future Social Security benefits,
or by permitting the investment of the trust funds in the markets. Some in this group would
have phased-in new personal accounts rapidly, giving workers bonds for their past Social
Security taxes, while others envisioned a long transition. Still others did not propose altering
the current system but would have created personal accounts to offset constraints that may
eventually be needed to restore the system’s solvency. (For a description of these bills, see
CRS Report RL30138, Social Security Reform: Bills in the 106th Congress.)
Legislation in 107th Congress. Representatives Sessions and Shadegg introduced
H.R. 849 on March 1, 2001. Under the bill, workers could elect to contribute 6.2% of
covered earnings to personal accounts. After participating in the personal accounts for 15
years, 12.4% of covered earnings would be placed in the personal accounts. Workers who
choose to participate would not receive any Social Security benefits.
Representative Petri introduced H.R. 2110 on June 7, 2001. The bill would make no
changes to Social Security, but it would allow workers to elect to contribute up to $10,000
a year to personal Social Security accounts. When the account is opened, an additional
$1,000 would be deposited from the general fund. The accounts would be administered by
an Investment Board and placed in a common stock index fund, insurance contracts,
certificates of deposit, or other investments as the board may provide. Upon retirement or
death of the account holder, the proceeds from the personal account would be used to help
provide Social Security benefits. If the amount in the personal account is more than
sufficient to pay Social Security benefits, then the excess would be distributed in the form
of an annuity or under a schedule similar to that applied to Individual Retirement Accounts.
Representatives Kolbe and Stenholm introduced H.R. 2771, a modified version of H.R.
1793 in the 106th Congress, on August 2, 2001. For workers under age 55, H.R. 2771 would
mandatorily divert 3% of the first $10,000 of Social Security-covered earnings (indexed to
inflation) and 2% of covered earnings above $10,000 to personal accounts. Workers would
be allowed to make additional contributions of up to $5,000 (indexed to inflation), with
lower-paid workers eligible to receive additional credit toward their account of up to $600.
It would impose benefit formula constraints substantially limiting the future growth of
benefits for middle and high-paid workers, and reduce COLAs by 0.33%. It would provide
a minimum benefit tied to the poverty level. It would increase revenue by increasing the
maximum taxable wage base and crediting all of the revenue from taxation of Social Security
benefits to the Social Security trust funds, instead of part going to Medicare.
Representative Shaw introduced H.R. 3497 on December 13, 2001. The bill would
establish voluntary personal accounts equal to between 2% and 3% of pay for workers who
pay Social Security taxes. Workers’ Social Security taxes would be unaffected, since
initially the accounts would be funded with general revenues. The accounts would be
managed by selected investment companies through portfolios containing a 60%/40% split
of equities and corporate bonds. Upon entitlement, an amount equal to 95% of a “life
annuity” would be transferred monthly from each worker’s account to the Social Security
system, and the higher of current law Social Security benefits or the life annuity would be
paid to the recipient (in effect, the annuity payment would fund a portion or all of the Social
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Security benefit). The remaining 5% of the account balance would be paid to the worker as
a lump sum. The account balances of deceased recipients would be used to finance Social
Security benefits of eligible survivors or would otherwise revert to the trust funds. The
account balances of workers who die before entitlement with no eligible survivors would
become part of the worker’s estate. The proposal would eliminate the earnings test for all
retirees, and enhance benefits for spouses by increasing benefits for divorced spouses,
workers who stay home to care for children, and retired or disabled widow(er)s.
Representatives DeMint and Armey introduced H.R. 3535 on December 19, 2001. In
some respects it is similar to H.R. 3497. The main difference is that H.R. 3535 would divert
from 3% to 8% of taxable earnings to personal accounts. It also would allow more of the
personal account to be paid as a lump sum, and would place 40% of account investments in
U.S. government (rather than corporate) bonds. Also, H.R. 3535 does not contain measures
to eliminate the Social Security earnings test or enhance benefits for spouses.
Representative Matsui introduced H.R. 4022, H.R. 4023, and H.R. 4024 on March 20,
2002. The bills would enact reform models 1, 2, and 3, respectively, of President Bush’s
Commission to Strengthen Social Security. The stated purpose is to subject the proposals
to debate now, rather than waiting until after this year’s congressional elections. On May 21,
2002, Representative Matsui introduced H.R. 4780, a bill to reject proposals that would
partially or fully substitute traditional Social Security benefits with personal accounts.
Representative Thurman introduced H.Res. 425 on May 21, 2002. H.Res. 425 is a rule
that provides for consideration of H.R. 3497 (Shaw) in the House. It also provides for
consideration of H.R. 3535 (DeMint), H.R. 4022 (Matsui), H.R. 4023 (Matsui), H.R. 4024
(Matsui) and H.R. 4780 (Matsui) as amendments in the nature of a substitute to H.R. 3497.
The stated intent of the resolution was to bring proposals that would establish personal
accounts within the Social Security system to the House floor for debate. On June 19, 2002,
Representative Thurman filed a petition to discharge the Committee on Rules from
consideration of the resolution. Under House rules, the discharge petition (Petition 107-7)
had to have 218 signatures to bring the measures to the House floor for debate.
Representative Nick Smith introduced H.R. 5734 on November 14, 2002. The bill
would allow workers to choose to divert part of their payroll taxes to Personal Retirement
Savings Accounts (PRSAs), which would reduce the worker’s Social Security benefit based
on the value of the PRSA assuming it were invested at a specified interest rate. Workers
could choose to make additional cash contributions of up to $2,000 to the PRSA. The bill
also would reduce Social Security benefits for most recipients through benefit formula
modifications and increases in the full and early retirement ages. It would increase delayed
retirement credits and benefits for widows, provide a minimum benefit and child drop out
years, and cover newly hired state and local government workers.
Senators Gramm and Hagel introduced S. 5 on November 19, 2002. The bill would
allow younger workers to divert part of their payroll taxes to a personal account that would
be supplemented by any unified budget surpluses attributable to annual surpluses in the
Social Security trust funds. When fully implemented, the government would guarantee that
workers would receive a combination of Social Security and personal account annuities that
would be at least 20% higher than the Social Security benefits promised under current law.
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When the annuities provided by the accounts are large enough to cause Social Security
projected costs to go down, Social Security payroll tax rates would be reduced accordingly.
None of these major reform measures were considered by either House of the Congress.
However, H.R. 4069 and H.R. 4070, introduced by Representative Shaw, which would have
enhanced spousal benefits and provided additional program safeguards, respectively, were
passed unanimously in the House. A version of H.R. 4070 was passed by voice vote in the
Senate, but the Congress adjourned before further action could be taken.
Legislation in the 108th Congress. Representative Shaw introduced H.R. 75 on
January 7, 2003. While similar in most respects to H.R. 3497, his reform bill in the 107th
Congress, H.R. 75 would scale annual contributions to personal accounts by limiting them
to the lesser of 4% or $1,000, and would give workers a choice of three investment
portfolios, each with different mixtures of stocks and bonds. Mr. Shaw also introduced H.R.
743 (the Social Security Protection Act of 2003, H.Rept. 108-46). The measure, which is
similar to H.R. 4070 in the 107th Congress, would provide additional safeguards for the
Social Security and Supplemental Security Income programs. On March 5, 2003, the House
of Representatives considered the bill, as amended, under suspension of the rules. The
measure failed by a vote of 249-180 (a two-thirds majority vote was required for passage).
One week later, on March 13, 2003, the House Ways and Means Committee approved H.R.
743, as amended, by a vote of 35-2. On April 2, 2003, the House of Representatives passed
H.R. 743, as amended, by a vote of 396-28. On September 17, 2003, the Senate Finance
Committee approved an amendment in the nature of a substitute by voice vote (S.Rept. 108-
176). The measure approved by the Committee contains several provisions that are not
included in the House-passed version of the bill, such as a provision that would restrict the
payment of Social Security benefits to certain noncitizens. On December 9, 2003, the Senate
passed H.R. 743, with an amendment, by unanimous consent. On February 11, 2004, the
House of Representatives passed the Senate amendment to H.R. 743, by a vote of 402-19.
On March 2, 2004, President Bush signed the measure into law (P.L. 108-203) [see CRS
Report RL32089, The Social Security Protection Act of 2004].
Representative Nick Smith introduced H.R. 3055 on September 10, 2003. It is basically
the same as H.R. 5734 in the 107th Congress. Representative DeMint introduced H.R. 3177
on September 25, 2003. It is similar in many respects to H.R. 3535 in the 107th Congress,
except that it would place 35%, rather than 40%, of account investments in government
bonds, and it would eventually allow investment in small and mid-cap equity funds.
Senator Lindsey Graham introduced S. 1878 on November 18, 2003. The bill would
allow workers age 25 and older to choose one of three options for the Social Security
program. Option 1 would be available for workers under age 55, who could choose to have
4 percentage points of the payroll tax redirected to personal accounts. Social Security
benefits would be reduced by the value of the hypothetical annuity from the account based
on the worker’s contributions compounded at an interest rate 0.3% below that of long-term
government bonds, and by reductions in the Social Security benefit formula. Social Security
benefits would be increased for widow(er)s and low-paid workers. Option 2 would not
include personal accounts, but would include the reductions in the Social Security benefit
formula and the increases for widow(er)s and low-paid workers featured under Option 1.
Option 3 would not include personal accounts and would maintain current-law benefits by
increasing the payroll tax by the amount necessary to fund them.
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Representatives Kolbe and Stenholm introduced H.R. 3821 on February 24, 2004.
While basically the same as H.R. 2771 introduced in the 107th Congress, the bill would
increase widow(er)s’ benefits to 75% of the couple’s combined pre-death benefit and limit
spousal benefits so that a couple’s combined benefit would not exceed the maximum benefit
payable to a hypothetical single worker with the same eligibility year as the retired worker.
Representative Paul Ryan introduced H.R. 4851 on July 19, 2004. Senator Sununu
introduced a companion measure (S. 2782) on September 9, 2004. The bill would allow
workers under age 55 to redirect a portion of payroll taxes to voluntary personal savings
accounts. Workers could redirect 10% of their first $10,000 (indexed to average wages) of
Social Security-covered earnings and 5% of remaining covered earnings to a personal
account. SSA’s Office of the Chief Actuary estimates that, on average, 6.4 percentage points
of the 12.4% payroll tax would be diverted to personal accounts. Workers who participate
in personal accounts would be issued a “benefit credit certificate” (or recognition bond) to
reflect benefits accrued under the traditional system, although benefits would be reduced to
reflect the Social Security payroll taxes diverted to the worker’s personal account. (Benefits
for disabled workers and their dependents and benefits for survivors (except elderly
widow(er)s) would not be subject to the reduction.) The bill would guarantee account
participants a combined payment (traditional benefit plus annuity) at least equal to Social
Security benefits promised under current law. Workers who choose not to participate in
personal accounts would receive traditional Social Security benefits.
The proposal would provide three initial investment options with specified allocations
in equities and fixed income instruments (e.g., U.S. government bonds, corporate bonds),
including a default option of 65% equities, 35% fixed income instruments. Once the
worker’s account balance reaches at least $2,500 (indexed to inflation), additional investment
options would be available. At retirement, the worker would be required to annuitize the
portion of the account balance needed to provide a combined payment (traditional benefit
plus inflation-indexed annuity) at least equal to Social Security benefits promised under
current law. Any excess balance could be withdrawn in a manner chosen by the worker.
Pre-retirement distribution would be allowed if the account is sufficient to provide an annuity
at least equal to a required minimum payment. The measure also contains several financing
provisions, including one that would reduce future growth rates for federal spending.
Representative Sam Johnson introduced H.R. 4895 on July 22, 2004. The bill would
allow workers under age 55 to redirect 6.2 percentage points of the payroll tax to voluntary
personal accounts. Workers who participate in personal accounts would no longer accrue
benefits under the traditional system and would be issued a recognition bond to take into
account benefits already accrued. Workers who choose not to participate in personal accounts
would remain in the traditional system, although initial Social Security benefits for future
retirees would be lower than benefits promised under current law. Under current law, initial
benefits are indexed to the growth in average wages. The measure would constrain the
growth in initial benefits for future retirees by indexing initial benefits to price growth, rather
than wage growth. This change in the benefit formula would not apply to disability benefits.
The proposal would provide at least three initial investment options, each with specified
allocations in equities and fixed income instruments (e.g., U.S. government bonds, corporate
bonds), including a default option of 60% equities, 40% fixed income instruments. Once the
worker’s account balance reaches at least $10,000 (indexed to inflation), additional
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investment options would be available. The account would become available at retirement,
or earlier if the account balance is sufficient to provide an annuity at least equal to 120% of
the poverty line. The worker would have three distribution options: annuity, programmed
withdrawal, or a combination of annuity and partial lump sum. Under the third option, the
portion of the account balance that exceeds the level needed to provide an annuity at least
equal to 120% of the poverty line could be taken as a lump sum. If a worker’s account
balance is not sufficient to provide an annuity at least equal to 120% of the poverty line, a
supplemental payment would be made to the account from general revenues to provide the
guaranteed minimum benefit payment.
Senator Corzine introduced S.Res. 432 on September 22, 2004, expressing the sense of
the Senate that Congress should reject Social Security privatization proposals.
Representative Obey introduced H.R. 5179 on September 29, 2004. The bill would
increase the rate of growth in the Social Security taxable wage base by 2 percentage points
above average wage growth for years 2006 through 2036, designed to bring the percent of
covered earnings subject to the Social Security payroll tax up to 90%; use an alternative
Consumer Price Index measure to compute cost-of-living adjustments for current and future
recipients; retain the estate tax (with an applicable exclusion amount of $3.5 million) and
earmark estate tax revenues for Social Security; and provide for future adjustments in the
Social Security payroll tax rate (employer/employee shares), if needed to bring the system
into balance based on the intermediate projections of the Social Security Board of Trustees.
LEGISLATION
H.R. 75 (Shaw)
Creates voluntary personal accounts for workers age 18 and older financed with general
revenues, guarantees participants a payment at least equal to current-law Social Security
benefits, and makes certain benefit improvements. Introduced January 7, 2003; referred to
Committee on Ways and Means.
H.R. 743 (Shaw)
Provides additional safeguards for Social Security and Supplemental Security Income
beneficiaries with representative payees and enhances program protections. Introduced
February 12, 2003; referred to Committee on Ways and Means. Considered by the House
of Representatives on March 5, 2003 and failed (249-180) to achieve the two-thirds majority
required under suspension of the rules. Approved by the Committee on Ways and Means by
a vote of 35-2 on March 13, 2003. Passed by the House of Representatives on April 2, 2003,
by a vote of 396-28. Approved by the Committee on Finance, amended, by voice vote on
September 17, 2003. Passed by the Senate, with an amendment, by unanimous consent on
December 9, 2003. Senate amendment agreed to by the House of Representatives on
February 11, 2004, by a vote of 402-19. Became P.L. 108-203 on March 2, 2004.
H.R. 3055 (Nick Smith)
Creates voluntary personal accounts financed by diverting a portion of payroll taxes and
makes modifications to Social Security benefits. Introduced September 10, 2003; referred
to Committee on Ways and Means.
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H.R. 3177 (DeMint)
Creates voluntary personal accounts for workers under age 55 financed by diverting a
portion of payroll taxes, guarantees participants a payment at least equal to current-law
Social Security benefits, and makes modifications to Social Security benefits. Introduced
September 25, 2003; referred to Committee on Ways and Means.
S. 1878 (Lindsey Graham)
Allows workers age 25 and older to choose one of three options for the Social Security
program, including one that would establish personal accounts for workers under age 55.
Introduced November 18, 2003; referred to Committee on Finance.
H.R. 3821 (Kolbe)
Creates mandatory personal accounts for workers under age 55 financed by diverting
a portion of payroll taxes and makes modifications to Social Security benefits. Introduced
February 24, 2004; referred to Committee on Ways and Means and Committee on Rules.
H.R. 4851 (Paul Ryan)
Creates voluntary personal accounts for workers under age 55 financed by diverting a
portion of payroll taxes, guarantees participants a payment at least equal to Social Security
benefits promised under current law, and includes a number of financing provisions.
Introduced July 19, 2004; referred to Committee on Ways and Means, Committee on the
Budget and Committee on Rules.
H.R. 4895 (Sam Johnson)
Creates voluntary personal accounts for workers under age 55 financed by diverting a
portion of payroll taxes, guarantees participants a payment at least equal to 120% of the
poverty line, and makes modifications to traditional Social Security benefits. Introduced July
22, 2004; referred to Committee on Ways and Means.
S. 2782 (Sununu)
Creates voluntary personal accounts for workers under age 55 financed by diverting a
portion of payroll taxes, guarantees participants a payment at least equal to Social Security
benefits promised under current law, and includes a number of financing provisions.
Introduced September 9, 2004; referred to Committee on Finance.
S.Res. 432 (Corzine)
Expresses the sense of the Senate that Congress should reject Social Security
privatization proposals. Introduced September 22, 2004; referred to Committee on Finance.
H.R. 5179 (Obey)
Increases the rate of growth in the Social Security taxable wage base; uses an alternative
Consumer Price Index measure to compute cost-of-living adjustments; retains the estate tax
(with an applicable exclusion amount of $3.5 million) and earmarks estate tax revenues for
Social Security; and provides for future adjustments in the payroll tax rate if needed to
balance the system. Introduced September 29, 2004; referred to Committee on Ways and
Means.
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