Presidential Conversation on Social Security
Blue Bell, Pennsylvania
February 10, 2005
Thank you all. Please be seated. Thanks a lot. Senator Santorum read that just like I wrote it. (Laughter.) Thanks for coming. I appreciate Rick -- I call him Rick -- for coming over from Washington. Today the United States Senate did something constructive; they voted to reform class-action lawsuits so that frivolous lawsuits won't drive up the cost of doing business in America, and so that people -- (applause.) And I want to thank you for your leadership on that issue, Rick.
I appreciate so very much Karen Stout, the President of Montgomery County Community College, for having us. (Applause.) I want to thank all the professors and students who are here. If you're a younger student here at Montgomery Community College, this is a really interesting conversation for you to hear. I mean, it's important that you listen.
I want to thank our panelists who are here. I want to thank the county commissioners who are here -- Jim Matthews being the chairman. Appreciate you, Mr. Chairman. (Applause.) Yes, lousy seat, doing a fine job, though. (Applause.)
I love the community college system in America. And I'll tell you why. Community colleges are flexible, available and affordable. Community colleges can adjust curriculum to meet the needs of the time. Community colleges are a -- Rick mentioned the word, "hopeful" -- a really hopeful place for people to gain the skills necessary to fill the jobs in a changing world.
And so I asked Karen, I said, have you got anything going on here that's different from the past. She said, quite a few things. We've got a biotech curriculum now that will train workers for the jobs which actually will exist. She said, we've got a fantastic nursing program. There's a huge demand for nurses. (Applause.) And she talked about medical assisting programs. I mean, there's a lot going on here, which says to me, it speaks for the vitality of an education system that's capable of adjusting to meet needs.
And so I want to congratulate those of you who support your community college system. I assure you that I will work with the Congress to see to it there's funding available to make sure people are trained for the jobs which will exist as we head into the 21st century. Thanks for having us. It's a fitting place to talk about the future, in an institution that is so dedicated to the future.
Today when I landed I met David Bulkley. I don't know where David is; I hope he got a better seat than the chairman. There he is -- yes, you did. (Laughter.) I'm glad you're here, David. David is what we call a USA Freedom Corps volunteer; he is a mentor. And the reason I like to herald folks like David is that the true strength of America lies in the hearts and souls of our citizens. If you really think about it, we're a remarkable country because there are millions of people who are willing to take time out of their busy lives to volunteer to help somebody else.
David chose to do so through Big Brothers/Big Sisters Amachi Mentoring Program. It is a fabulous program. It's one to help youngsters whose mom or dad may be incarcerated. It is a necessary program. It is a vital program, and it works because loving people are willing to support it. If you're interested in serving your country, if you want to make your community a better place, feed the hungry, find shelter for the homeless, and surround somebody who hurts with love -- just like David Bulkley has done.
I appreciate the example you've set, and thank you for coming. (Applause.)
Before I talk about Social Security, I do want to talk about a few other issues. You know, when the President gets the mic -- (laughter) -- I told her, she said -- Laura said, "Where are you headed today?" I said, "I'm going down to North Carolina, and then I'm going to Pennsylvania." She said, "Let the panelists talk." (Laughter.) She knows me well. (Laughter.)
But I do want to talk about what a hopeful -- how hopeful the world has been recently. There's been -- some amazing things have happened. The people of Afghanistan voted for a President. Millions of people went to the polls after the country was rid of the Taliban. We acted in our self-defense in two ways: One, we rid the country of the Taliban that was fostering and providing safe harbor to al Qaeda, which had attacked our country; but we also enhanced our defense by working with that country to promote democracy -- democracy in the part of the world that a lot of folks said it's just impossible to happen. But I don't subscribe to that kind of doubt or cynicism because I believe deep in everybody's soul is the deep desire to live in freedom.
And the Afghan people when given that chance -- (applause.) I say that our security is more enhanced because democratic societies are peaceful societies. Democracies promote peace as they listen to the hopes and aspirations of their people.
And then there was the vote in the Palestinian Territory. And I want to commend President Abbas for his leadership, his desire to fight off the terrorists so that a democracy can evolve in the Palestinian Territories, which will make it more likely we'll have peace with Israel. (Applause.)
And, of course, the Ukranian elections were a great inspiration for all. I'm looking forward to meeting President Yuschenko on my trip here to Europe -- I think I'm going a week from today -- two weeks from today -- soon. (Laughter.) Before the month is out. (Laughter.)
And then, of course, a week ago Sunday, something amazing happened -- that, in spite of terror and fear and assassination attempts and threats, millions of people in Iraq went to the polls to say, we will not be intimidated, we want to be free. (Applause.)
These are important events. They're incredibly important events. And I don't know if you suffered through the State of the Union, but there was an amazing moment where the Iraq human rights activist who voted and the mom of the fallen Marine hugged, which spoke volumes to me about, one, the appreciation of the Iraqi people for the sacrifices being made on their behalf; and secondly, a mom honoring a fallen soldier, honoring her son. And I hope she realized then and I hope you all do, too, that by having a free society, not only are we more secure in the short run, but in the long run our children are more likely to grow up in a peaceful world. Freedom is on the march, and for the next four years as your President, I will continue to work with friends and allies to spread freedom and, therefore, peace around this world. (Applause.)
A couple of other things I want to talk about. The economy is moving -- created 146,000 new jobs in January. The national unemployment rate is 5.2 percent. People are working. The fundamental question is, how do we keep it growing? I'm a big believer in legal reform. Today I mentioned the Senate took a big step. The House will then respond. I hope to be signing a bill relatively quickly. We need to do the same thing for asbestos lawsuits. We need to fix the system.
Legal reform is an important part of making sure America is the best place in the world to do business, and that the small business sector remains strong and the entrepreneurial spirit is vibrant. And so is good budget policy. I submitted a good, lean budget to the United States Congress the other day. I've heard from business leaders, both large and small. I've heard from community activists. I've heard from members of both sides of the aisle say, let's do something about the deficit. I said, all right, let's go. And here's a budget.
And inherent in that budget is, one, government must set priorities. And when government finds programs that aren't working, it must have the courage to eliminate them. And that's precisely what our budget does. It's a budget that sets priorities, and a budget that makes it clear we will be wiser about how we spend the taxpayers' money. And I expect Congress to pass that budget. (Applause.)
We have an obligation to confront problems. Again, I want to talk about Social Security, which for years has been called the third rail of American politics; if you touch it, you expire politically. (Laughter.) But I believe the job of the President is to confront problems, not to pass them on, not to say, okay, somebody else will solve it. And so I want to talk about Social Security, just like I did in the State of the Union and like I will do over, and over, and over again around this country to make it clear we have a problem. (Applause.)
And here's the problem. Rick mentioned it. I want to, again, say what he said. Baby boomers like me are fixing to retire, and there's a lot of us. There's a whole bunch more of us than perhaps at any other time in our history. And yet, we're living longer, and the government has promised us greater benefits than the previous generation. And yet, as Rick mentioned, fewer people are paying into the system. So you can see the math. You've got more people living longer, getting greater promises with fewer people paying for it, which means, in the year 2018, the system starts to go into the red. In other words, more money going out than coming in.
Now, one of the myths about Social Security is there's a pile of money sitting there accumulating, because you put money in, the government saves it for you, and then when you retire you get it out. That's not the way the system works. Every dime that goes in from payroll taxes is spent. It's spent on retirees, and if there's excess, it's spent on government programs. The only thing that Social Security has is a pile of IOUs from one part of government to the next. This is a pay-as-you-go system.
And so, therefore, when you have more retirees living longer for greater benefits, with fewer people paying in, the system inevitably will go into the red. In 2018, 13 years down the road, it starts to go negative. And every year thereafter, the situation gets worse. In other words, more money is required to meet the promises. So that by the year 2027, the government is going to have to come up with $200 billion additional above and beyond the payroll taxes to meet promises -- and greater the next year, and greater the next year; $300 billion in 2037, until 2042, it's broke. And that's the dilemma we're faced with.
And the fundamental question is, are we willing to confront it? And so my first mission is to travel our country making it clear to people of all political parties, all demographics, we've got a problem. And you can define it "crisis," "big problem," whatever you want to define it. All I ask is that you look at the chart and you can define the problem however you want to define it. If you're a young person who's going to have to tote the bill, I would call it a significant problem.
Now, it is not a problem for people who've retired and are near retirement. And so part of the reason I'm going to travel the country is not only to say to folks, we got a problem and here it is -- but if you've retired, the system is in good shape for you. You don't have a darn thing to worry about. I don't care what the ads say, I don't care what the spinners say, you're in good shape. The system will meet its promises to you. And that's an important thing for seniors to hear, because I fully understand a lot of seniors rely upon Social Security. There's a lot of folks that count on this very important program in order for them to live.
And so for the next weeks I'll be continually traveling our country saying two things: One, we've got a problem; and, two, if you've retired or near retirement, born before 1950, you don't have a darn thing to worry about, the system will meet its promises.
Now, once people see there's a problem, the next question is going to be, what are you going to do about it? And I have an obligation to participate in the process. As Rick mentioned, my predecessor, President Clinton, addressed this issue. And there was a lot of interesting ideas that were floated about how to permanently fix Social Security. There's no need to put a Band-Aid on it now. Now is the time -- if we're going to address it, we might as well fix it forever. And so we talked about different ideas. And as I said in my State of the Union, all ideas are on the table. If you've got a good idea, whether you're Republican or Democrat, bring it forth. People should feel free to be able to debate this issue without fear of political reprisal.
Now, I've got some ideas myself. And one of the ideas is to allow younger workers to take some of their own money and set up a personal retirement account. (Applause.) The idea is to allow a younger worker to be able to earn a better rate of return on his or her money than that which is being earned as a result of the Social Security money going through the federal government. It's called the compounding rate of interest.
I'm not going to try to get on your turf -- I was history major, C student. (Laughter and applause.) There's hope for you C students. There's hope for you. (Applause.) But let me give you an example of the compounding rate of interest. Now, the program that we're suggesting to Congress is that personal accounts start slowly so that we can better fund the transition to personal accounts, and that eventually, though, workers should be able set 4 percent of their payroll taxes aside in a personal account.
So assuming that the 4 percent level is reached, a person earning $35,000 a year over their lifetime, setting aside 4 percent of the money, with the compounding rate of interest, by the time he or she retires, will have a nest egg of $250,000. Now, that's a capital base from which that person can draw money to supplement his or her Social Security check she'll be getting, however great that may be. So the personal account will be able to earn money over the course of time at a greater rate than the money that the government holds. And that's important.
Now, people say to me, what does a personal account mean? Is there an example of a personal account? Tell me -- this sounds like a brand new idea. It's not a new idea. If you're a federal employee, you've got what's available -- what's called a thrift savings plan, that says you can take some of your money and invest it in stocks and bonds. So we've done this before. My view is if it's good enough for federal employees, it ought to be good enough for younger workers. In other words, it's an attractive way to build assets. (Applause.) We ought to, in Washington, at least be consistent in our thought. We ought to be fair in our dealings with people.
People say, well, what kind of investments could I invest in? Well, obviously, we're not going to let you take your money and put it in the lottery. That would mean you wouldn't have anything left, in all due respect to those people who run the lotteries. Lotteries aren't meant for you to win. (Laughter.) They're meant for a few people to win at best. Or you can't take it and shake dice at the local casino to try to enhance your return. In other words, there will be -- the types of investment vehicles you'll be investing in will be regulated. There will be a conservative mix so that the risk is held down, but the reward is greater than that which is in the Social Security trust.
People say, well, when I -- if I'm the $35,000-a-year person and I've got the $250,000 upon retirement, can I draw it all out? No. You can't draw it out -- all out. It is meant there to supplement your Social Security check. In other words, it is part of a retirement fund.
The distinct advantage of this is not only a greater rate of return, it's your own assets. I think there is something incredibly vital about a society in which people own something. And we want more people owning things in America -- your own home, your own business, and owning and managing your own retirement account. I think it's a healthy thing for people to be able to have a quarterly statement watching their asset base grow. It certainly would cause people to pay attention to the economic policies of the federal government. (Applause.) And I know that an account will be a vital part of a person planning for their future.
So, for example, if this person decides not to take all the money out of the account over time to retire, he could pass it on, or she could pass it on to whomever she chooses. It becomes a part of a family legacy.
And so personal accounts have got a lot of advantage. And they're a new thought in terms of Social Security, but I think over time, as this debate takes place, people will see they're an essential thought. Personal accounts alone will not solve the problem. But personal accounts coupled with other reforms that fix the problem will make it more likely a younger worker is going to get the benefits that the government has promised -- closer to the benefits the government has promised. And that's important. (Applause.)
And so I'm looking forward to not only talking about the problem and the need for those of us who have earned the trust of the people to do something about it, but also to reassure the American citizens who've retired, you don't have a thing to worry about, you're going to get your check; but also say to young people, you better pay attention to this issue. If nothing happens, you're going to get stuck with an enormous tab: $200 billion in 2027; bigger every year until it's bankrupt. The longer we wait, the more severe the fix becomes.
We have an obligation and a duty to confront problems and not pass them on to future generations, and that's what we're here to talk about today. And we're going to start with Olivia Mitchell. Olivia, you live in Pennsylvania. What do you do?
MS. MITCHELL: Thank you very much, Mr. President, it's a pleasure and a delight to be here. I teach at the Wharton School at the University of Pennsylvania. And I have to say I've been teaching in the area of Social Security and retirement for, shall we say, more than 25 years. What I have found over the years is that it takes an enormous amount of effort to get young folks to care about retirement planning. But this year, Mr. President, you've made a difference, because this year they're sitting up and paying attention. In fact, I was even able to get my 16-year-old daughter, sitting over here, to attend. So I thank you for that.
THE PRESIDENT: Don't mention her. (Laughter.) I tried that once, introduced my 16-year-old daughters, and they didn't speak to me for months. (Laughter.)
You know, since she talked about young people -- sorry to interrupt -- I'm not listening to Laura, obviously. (Laughter.) Somebody told me an interesting -- they saw a survey that said younger people believe they're likely to see a UFO than get a Social Security check. (Laughter.) Anyway. (Laughter and applause.) I don't know if it's true.
* * * * *
THE PRESIDENT: Thank you. (Applause.)
Robin Reedy, you ready to go?
MS. REEDY: I'm ready as I'll ever be.
THE PRESIDENT: If that's the case, speak in the mic. (Laughter.)
MS. REEDY: Yes, okay. I'm sorry. (Laughter.) Guess I wasn't ready. (Laughter.)
THE PRESIDENT: Robin has got a compelling story. Why don't you share your story with us, please.
* * * * *
MS. REEDY: Without the income from my husband -- and without the future income that he is going to be providing, I am really struggling now to try to come up with a plan that can keep me going if, God willing, I'm around for another 20 or 40 years.
THE PRESIDENT: You look like you will be.
MS. REEDY: Thank you. (Laughter.) I hope so.
THE PRESIDENT: She claims she's a grandmother.
MS. REEDY: Guys, if you're out there, hi. (Laughter.)
* * * * *
THE PRESIDENT: Her husband pays into the system, he passes away unexpectedly, and for a period of time, there is -- the money he has contributed has no value to her.
MS. REEDY: It's gone. He put it in -- for 45 years he's paid money in there.
THE PRESIDENT: Now, there will be survivor benefits starting at the age 60.
MS. REEDY: Some, yes.
THE PRESIDENT: But not nearly as much as he put in. And the point of a personal account is that, for peace of mind, in this case, there would be a nest egg, your money, your assets, that -- on which you could live. And that's one of the benefits. And the system -- the system has worked great for a lot of people. But there are some glaring errors, and here is one. And a personal account, an asset base, helps address that error.
MS. REEDY: It would be something that would be mine and it would not belong -- go back to the government.
THE PRESIDENT: Absolutely. Are your kids taking care of you?
MS. REEDY: Are my kids -- oh, my kids are great.
THE PRESIDENT: Well, good, keep doing it, kids.
MS. REEDY: They help -- they're wonderful. They're wonderful.
THE PRESIDENT: Listen to your mother, as well. (Laughter.)
MS. REEDY: But I think a lot of the young women here need to realize, too, that -- and I didn't realize it until I became a widow, that by the age of 60, one in six of us will be widows. I mean, that's just a statistical fact. And that goes up -- it goes up very rapidly after that. So to have something like that that is left behind to you, that can help you through a very difficult period, I think would be a very, very good thing. It would be a godsend, and it would be fair and it would be just.
THE PRESIDENT: Good job. Thanks for coming. (Applause.)
All right. Sukha Brooks.
Q Hi, good evening, Mr. President.
THE PRESIDENT: Sukha, where do you live?
MS. BROOKS: I live in Morton, Pennsylvania.
THE PRESIDENT: Morton, Pennsylvania.
MS. BROOKS: Morton, Pennsylvania.
THE PRESIDENT: And?
MS. BROOKS: I'm currently going through a divorce, and I have three children. Social Security is very important to me. I'm 37 years old. I have an 18-year-old that's started Delaware County Community College, and she's majoring in education. She's -- her aspirations are to become a teacher.
THE PRESIDENT: Good, that's good -- noble.
MS. BROOKS: Two more children, and Social Security is very important being a single mother. We anticipated a lot more investing on my husband's side. I work for a small business, so we did a lot of the investing through his company. And now at the age of 37, I was happy that -- when you talked about this revamping Social Security, particularly on the aspect of personal accounts, because I need to make up some lost time. And I think what you're proposing is giving someone that's in my situation an opportunity to be able to take a personal account into my retirement and to look forward to something -- particularly a higher return in what you're proposing.
THE PRESIDENT: Yes. You know something amazing, I was just thinking, listening to Sukha -- when I was her age, there wasn't a lot of talk about, one, whether Social Security was going to go down the tubes. Fellow baby boomers here, back me up, will you? There wasn't much doubt in our mind, right? It wasn't a conversation. Nor was there a lot of talk about 401(k)s, IRAs, personal accounts. The world of ours has changed. Here's Sukha saying, giving me a chance to invest my own money. There has been a shift of attitude amongst Americans -- all walks of life -- all walks of life.
And I appreciate that spirit of wanting to own something to bring peace of mind, and to pass something on to your children.
MS. BROOKS: I appreciate you giving us the opportunity.
THE PRESIDENT: I'm glad you're here. Thanks for coming, Sukha. Great job. (Applause.)
MR. McMANUS: Mr. President.
THE PRESIDENT: Tom, glad to see you.
MR. McMANUS: First, I want to welcome you back to the great state of Pennsylvania.
THE PRESIDENT: Oh, yes, glad to be back. Thank you. (Applause.) I heartily concur.
MR. McMANUS: I'm here today with my lovely wife, Kim; my young daughter Cheyenne who is four-and-a-half and my mom and dad who are Social Security participants. My young son Brendan is at home with my -- his grandmother. He's three. And I've got two major concerns with the current status of Social Security.
THE PRESIDENT: First, what do you do -- give a read on what you do. I think people --
MR. McMANUS: I am a certified financial planner.
THE PRESIDENT: Good.
MR. McMANUS: What I do in my professional life, I help people build dream retirements.
THE PRESIDENT: Right.
MR. McMANUS: I work for a local company right here in Montgomery County called Lincoln Investment Planning. And my main objective every day is to help people achieve their retirement dreams.
THE PRESIDENT: Before we get to why you care about Social Security, let me ask you a couple of questions about investment vehicles. See, people wonder whether or not it is possible to design a system that is simple for all to understand and achieves an investment objective which is limited risk and a better rate of return than the paltry sum that is now garnered within the Social Security. This is kind of a leading question, I'm not even a lawyer, but do you -- (laughter.) I presume that happens all the time at your business.
I mean, people have got to understand. There's some concerns about what a personal account means -- what can you invest in and what can you not invest in? And is it possible to design a system that helps us achieve the objective, which is security upon retirement?
MR. McMANUS: Well, I agree with you, Mr. President. My own feeling is -- and I convey this in my practice -- a dream retirement consists of three components: your employer-sponsored plan, your personal savings and investments -- IRAs, 403(b)s401(k)s,that kind of thing -- and Social Security.
* * * * *
THE PRESIDENT: See, that's an interesting dynamic for those political scientists out there. Let me share some -- a view on what he just said. See, I campaigned on the issue because I realized, one, we needed to do something and I wanted people to think that if the guy got in he would take on big problems; but also, I recognized there were a lot of young people in America who feel the same way Tom feels -- they're not going to see anything. In other words, the dynamic has shifted dramatically.
And it will particularly shift once senior citizens fully understand nothing changes. See, once the senior citizen understands that the system is solvent for them, the drivers of this policy are going to be people like Tom, who say, wait a minute, you've taken care of one generation; how about us? And it's amazing what happens when people start to speak on an issue. Congress -- if they speak loud enough and consistently enough and long enough, Congress tends to respond. And that's why I'm hopeful we can get something done.
* * * * *
THE PRESIDENT: I'm going to be holding those hands right with you, because it's the truth. No matter what the rhetoric might be, the truth is you don't have a thing to worry about. The people that have something to worry about are youngsters. You're a youngster. (Laughter.) And -- I'm no longer a youngster. And that's why we've got to act.
Speaking about youngsters, Sara is with us. Sara Holcombe. Welcome.
MS. HOLCOMBE: How are you?
THE PRESIDENT: Well, I'm doing pretty good. Thanks very much. Feeling pretty spunky. (Laughter.)
* * * * *
THE PRESIDENT: Yes, see -- I'm going to say it again. People are thinking differently about their own money. It is a remarkable generational shift, isn't it? If you really think back, if those baby boomers here think back, we weren't really spending a lot of talking about, oh, I want to be able to take my own money out of Social Security and put it in something that would grow over time. It's really changed. And I think a lot of younger workers are now beginning to say, just give me a chance to do a better job than the government has done on my behalf.
I repeat to you, the $35,000-a-year person -- that's $35,000 over his or her lifetime -- taking 4 percent of the payroll tax, which isn't all that much money, compounds, though, over a period of time to $250,000. So if you're -- I don't know if it works -- if you were to say the person who makes $70,000 over their lifetime and you compound the same, it actually ends up being $500,000, but it's substantially more than $250,000. We're talking about people over their lifetime being able to accumulate quite a sizeable nest egg to supplement that which the government may be able to pay.
Keep going, we've got to kind of fill some time here. (Laughter.)
MS. HOLCOMBE: I also have parents that are nearing the retirement age, and a grandfather who is 100 percent dependent on his Social Security check. And part of my attitude in this is I want to make sure that the system stays the same for them, but is progressive enough to be there when my generation needs it.
THE PRESIDENT: Yes, that's the question. She's actually laid out the dilemma: Can we do that? And my answer is, absolutely. Now, it's going to require a political will that is a little different than what's taking place in Washington, I fully concede. I mean, if this is all viewed through the prism of, well, I can't cooperate with so-and-so because they're of a different political party, then I can't say that's going to happen. But I do believe that the people, if they speak loud enough, are able to effect policy. And I do believe if young people pay attention to this issue and start saying, we expect you -- we expect you, Mr. President, and we expect people, regardless of their party, to come together and get this thing fixed now, before it is too late, we've got a shot at getting it done.
My pledge to you is I'm going to work hard on the issue. I think it is a vital issue. I like to get out of Washington and I like to travel around the country. I went to five states after the State of the Union; I went to two states today. Every week -- except that for which I'm going to be in Europe -- I'm going to keep traveling the country reminding people of the obligation that we have in Washington, D.C. to bring folks together and to fix this problem, so that people will say, when it's all said and done, they came, they went and they did their job. (Applause.)
Listen, I want to thank you all for coming. I hope you found this conversation interesting, informative. It is -- I believe it's necessary. And I want to thank our panelists who did a fantastic job of sharing with us what's on your mind. There's a lot of people like you out there, that are asking the question, what are you going to do about it -- and I'm ready to lead on the issue.
May God bless you all. Thanks for coming. (Applause.)
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