|The White House
President George W. Bush
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For Immediate Release
Office of the Vice President
May 2, 2005
Vice President's Remarks and Q&A at a Town Hall Meeting on Strengthening Social Security
Campbell High School
10:52 A.M. EDT
CONGRESSMAN GINGREY: Thank you very much. Great to see everybody. Great to be here at Campbell High School in Smyrna, Georgia, one my favorite parts of this great 11th congressional district.
I would like to extend a warm welcome to our community leaders, local members, leaders, students, friends, and especially to Senator Johnny Isakson, my colleague in the House -- (applause) -- and my colleague in the House of Representatives, Tom Price, Dr. Tom Price. (Applause.)
It's an honor and a privilege for me to welcome the Vice President of the United States, Mr. Dick Cheney. He has graciously joined us to speak about the importance of strengthening Social Security.
Since the 2000, election we've seen the strong, effective and moral leadership that President Bush and Vice President Cheney have brought to our country. From his dedicated leadership in the aftermath of September 11th, to his commitment to bring meaningful tax relief to hard working Americans, Vice President Cheney -- now, I knew I should have committed all this to memory because I don't turn pages very well -- Vice President Cheney served our nation with distinction and duty to the American people.
We are very fortunate to have such an experienced and knowledgeable man serving as our Vice President. Mr. Cheney has served four Presidents, including former Presidents Nixon, Ford, and George H.W. Bush. In 1978, the people of Wyoming elected him to Congress where he served in the House leadership. Vice President Cheney understands the importance of protecting and defending America. He served as the Secretary of Defense under President George H.W. Bush, and he directed the highly successful operation, Desert Storm, in the Middle East.
Since his return to the White House in the current Bush administration, he has served the American people with unwavering leadership and a moral fortitude that I deeply respect. It is an honor for Vice President Cheney to join us in Smyrna today. And I know everyone is eager to hear his thoughts on strengthening one of our most important federal programs, Social Security.
Ladies and gentlemen, the Vice President of the United States. (Applause.)
THE VICE PRESIDENT: Well, thank you. Thank you all very much. Sit down, please.
Well, thank you very much. Thanks, Phil, for welcoming to your district. I'm delighted to be here in Smyrna this morning and join our colleagues Tom Price, and of course, Johnny Isakson. They're doing a great job for Georgia and the United States Congress. I get to work with them on regular basis.
And of course, some of you may not know, I actually -- as Phil mentioned -- served 10 years in the House of Representatives. So I care a lot about the Congress and I got to be a judge of congressional horseflesh while I was there. I was the congressman from Wyoming. Wyoming only has one congressman. It was a small delegation. (Laughter.) But it was quality. (Laughter.) And I'm delighted -- (Applause.) I'm always pleased, though, to spend some time with people like Phil and Tom and Johnny because they do do a superb job. I also understand my old friend Ralph Reed is here this morning. I've known Ralph for many years. (Applause.)
So I thought what we'd do today -- the purpose of these meetings, we've done a few of them now around the country. The President has been in some 22 or 23 states. I haven't been in quite that many, but I've been on the road a fair amount myself -- and that's to focus on Social Security.
We've been -- the first four years we were there was really a remarkable time. We ended up having to deal with issues that we never dreamed up when we were sworn in, in the aftermath of 9/11, when we lost 3,000 Americans to terrorists that morning. And that has occupied a good part of our time. And we've had some, I think, significant success in no small part due to the leadership of our President, but also to the enormous effectiveness of the men and women of the United States military. They've done a superb job for us. (Applause.)
We'll continue, obviously, to spend a lot of time and energy going forward because the war on terror is with us for the foreseeable future. We've been fortunate that we have not been struck again now on some 44 months. But you can never let your guard down, and we have to keep at it, make certain that we get things right not only in terms of defending the nation here at home, but also aggressively going after the terrorists wherever they organize and plan and train because we're all going to be a lot safer and more secure if we go fight the battle on their turn, instead of here in the United States.
We're also, obviously, focused on the economy. And we think we've had some considerable success there. We've added about 3 million jobs in the last two years. The economic growth continues apace and in reasonably good shape. And we think that there's a bright future ahead of us, but it requires constant tending, obviously. We need to do everything we can to control federal spending, to keep the size of the deficit down, and continue to support pro-growth, pro-job, pro-entrepreneur kinds of policies that will guarantee that the opportunities are going to be there for our young people, as well.
But what I wanted to focus on this morning is a program that everybody is familiar with, that a lot of folks used to call the third rail of American politics. You touch it and you die. That was the advice given to most politicians. And we got folks out there saying, why do Bush and Cheney want to be talking about Social Security.
Well, folks, it's our job. We get paid by all of you to go to Washington and try to address problems and try to address them in a timely fashion. And this is a problem. Social Security has been a great program now for 70 years. We've got millions of Americans who have depended on it. My parents, I'm sure a lot of family members have over the years paid into the Social Security system throughout their entire careers and then retired and drawn benefits from it. And that's as it should be.
The problem we have is that the American population profile, if you will, looks dramatically different today than it did 70 years ago when we created Social Security. Back in the 1930s, average life expectancy was 62. A majority of Americans didn't live long enough to draw full retirement benefits when you had to get to be 65 to draw benefits. Now, today average life expectancy is 77 to 78. Every American on average lives 16 years longer today than we did 70 years, thanks to the wonders of modern medicine and so forth.
But that means that anybody who does retire and starts to draw benefits out of the system draws them for 16 years longer on average than was true when the program was established. We've also got the baby boom generation coming along. Those people born in 1946 and after. President Bush was born in 1946. He's part of the problem. (Laughter.) Don't tell him I said that.
But the fact is that that population boom that came with the aftermath of World War II will soon be reaching retirement age. And in 2008, they will hit 62, that first wave, that front end, if you will, of that population bulge. And we know from experience that a majority of Americans these days are taking early retirement under Social Security, retiring at age 62. So all of a sudden we're going to have this surge into the retired community of a lot of new people.
Today we've got about 40 million people drawing retirement benefits. Over the next 20 years or so, we'll see that expand where it's almost 75 million people drawing retirement benefits, as that baby boom generation reaches retirement age. So bottom line, we're going to have a lot more people retired, living a lot longer than was true before, and as a result, drawing a lot more out of the Social Security program than was ever true before.
And we have promised benefits down the road to future retirees that we've never funded. And the fact of the matter is there's a gap, if you will, between the promised level of benefits and what we can expect to collect in revenues from the existing system. If you look at the chart over here on my left, and you see all that red ink, that's the difference between what's been promised -- that's the flat line at the top -- and the declining line on the right, and it's where the revenues are going to take it.
There are several different ways to describe what's happening there. Obviously, when we're in the black we're still collecting benefits. But in about 2017, where the black and the red areas meet, we start paying out more than we're taking in, in terms of the Social Security system -- the payroll tax. And those out-year deficits over the next 75 years, 70 years or so amount to upwards of well over $3 trillion. And if you take the total unfunded liability, that is money -- benefits we've committed to, if we leave the program as is, but that we're just not going to pay for it, or haven't figured out how to pay for it yet over the total life of the system is over $11 trillion. That's the amount of red ink that's there.
Another way to think about it is every year that goes by that we don't address this problem adds $600 billion to the cost, ultimately, of solving the problem.
So there is a problem there. Now, it's not a problem for anybody who is currently retired. If you're already drawing benefits, this isn't about you. The money is in the system to pay those benefits. We know how many people are in that age group. We know how long they're likely to live. We know what the formulas say it's going to cost us to support them. And if you're already retired, relax. Nobody involved in this Social Security debate is talking about changing the program from your perspective, in terms of your benefits and what kind of retirement you're going to have going forward.
We're also focused and understand that we have an obligation to those that have been paying into the system for a long time and are getting near retirement to preserve the program for them, as well, too. The way to think about this debate is to remind yourselves that we're talking about people born after 1950 being affected by the proposals that are being looked at today. If you were born before 1950, the chances are none of this is going to affect your retirement, your benefits, or have any impact at all upon the retirement you've planned for, earned over the years because you've paid into the system, and so forth.
We're talking about future generations. We're talking about my kids. I've got two daughters in their 30s. We're talking about your kids and grandkids, and what kind of program is going to be there for them. And that's what we need to address, and that's why we need to find ways, basically, to shore up the system, if you will, or reform it so that those benefits will be there in the future. If we don't do anything at all, if we just stay where a lot of people have said we ought to stay -- there are a number of members of Congress of the other faith who have said that we don't need to do anything -- well, if you don't do anything, the net result will be, for somebody today, say, in their 30s, by the time they get to retirement age, their benefit levels are going to be cut some 26 percent or 27 percent. Automatic, that's what will happen with today's existing law.
Another way to think about the problem is to realize that Social Security is what we call a pay-as-you-go system. A lot of people are of the opinion that what happens is you work all your life, you pay into Social Security; the government takes that money, puts it in a bank, sits on it, and when you retire, they send it back to you. No, that's not how it works. The way it works is, the money we take in today in payroll taxes from today's worker goes out tomorrow to pay the retired benefits of those already drawing benefits. And when there's a surplus, as there currently is in the system, that extra money also gets spent by the federal government on various other programs. In return for that, there's an IOU that goes into a file cabinet over in West Virginia where we keep track of these transactions. But there's not a pile of cash sitting out there that represents what everybody has paid into the system, because it is a pay-as-you-go system, money in one day and out the next.
But that means also the solvency of the system is dependent in part on how many people we've got paid into it and, obviously, the rates they're paying at, too, what the tax rates are. The fact is when we set up the program back in the '30s, we had about 40 workers working for every one retiree. In 1950, we had 16 workers for every one retiree. Today we've got about 3 workers for every one retiree, and a few years down the road it will be down to just 2 workers working, paying in to pay the benefits for each retiree drawing funds out of the system.
Another way to look at it that describes that or represents it, over here on the right. You can see that if you go back to 1950, when we had 16 workers -- and let's assume you had the average benefit, what's being paid today to the average retiree of $14,200 a year -- when you had 16 workers paying in, and each of them paid $900 apiece, then that would support one retiree drawing $14,200 in benefits coming out. If you move over to today, where you've got 3 workers, the middle bar, for every retiree, each worker has to pay $4,700, in effect, in so that you get to the point where the 3 workers can support one retiree at $14,0200 a year. And when you get out to 2040 -- that's the column on the right, the red one -- that's where we're down to just 2 workers for each retiree, each worker would have to contribute $7,100 a year to support that retiree at $14,200 a year.
So you begin to see the nature of the demographic problem we're having to deal with here. Now, there can't be any argument about the facts. We know how many people are alive today. We know how many people we can expect to be born tomorrow. We know how long they're likely to live. We can make very sound estimates on what the program is going to cost, depending on the promised level of benefits and how much revenue we're going to take in, depending on the level of taxation, as well. So those facts are not in dispute. And I think anybody who sits down realistically and looks at it will conclude, as the President has, that we've got an obligation as public officials -- the President, Vice President, members of Congress -- to say to the American people, those are the facts, that's what the system is set up for. And if we're going to avoid a train wreck down the road, we need to make changes now and reforms now because we've got the advantage of time now, because we have the opportunity, if we make the adjustments now, to make them in such a way that the ultimate impact in terms of individuals and their ability to adjust, as well, with respect to their own planning will be enhanced by the fact that they're going to have several years to work at it.
So we have, in the course of the debate this year, said, look, let's come together as a nation on a bipartisan basis, Republican and Democrat alike, let's have this debate, let's start putting ideas on the table and see what various options and possibilities might be -- and there are a whole, wide range of options out there -- and let's engage in a national dialogue, and let's solve this problem. And so that's what we're all about. And we're interested and eager to move forward. We don't think you can sit down and say, look, it has to be this way, it's my way or the highway. We know that won't work. We know it does have to be bipartisan.
The last time we had a problem in Social Security was back in 1983, when I was a member of the House, and we set up a commission headed by Alan Greenspan, who was then a private economist, but now Chairman of the Federal Reserve Board, and Ronald Reagan and Tip O'Neill, Republican President and Democratic Speaker of the House, came together, worked on a bipartisan basis, and we got a package put together that we got through, and saved the Social Security system in 1983, when it was about to go belly up, because it was actually running out of money in those days. But we need to do that again. We need to come together as a nation and solve this problem.
Now, there are a couple of ideas on the table, and let me mention two of those, and then I'll stop and we'll have an opportunity to respond to questions or comments from all of you. One of the things the President and I think makes sense is the idea of personal retirement accounts. (Applause.)
Now, what do we mean by personal retirement accounts? Well, this would be a modification in the existing program. Today the taxes that are paid into the system constitute about 12.4 percent of payroll. That is, the individual worker pays 6.2 percent into the system, the employer pays 6.2 percent, for a total of 12.4 percent contribution for each worker, on the first $90,000 of income. And that upper cap is adjusted for inflation. But that system, we think, could be modified by taking 4 percent out of -- taking 12 percent -- or taking 4 percent out of the 12.4 percent, and allowing individuals to invest that into what's called a personal retirement account.
What do we mean by that? Well, we mean you'd be able to take out an amount that would go into -- be invested in one of four or five different options that would be created by the federal government that would involve investing a portion of your payroll tax into that account, that would be invested in stocks and bonds or some combination thereof. If you wanted a very conservative option, you could invest it in U.S. Treasuries. And that money would be yours; it would earn interest over time.
And we've got a lot of recent experience to give you a pretty good guideline of how that would function, because the federal government has a thing called the Thrift Savings Plan for federal employees, and members of Congress, that allow them to put a portion of their pay into the Thrift Savings Plan every month. And that's been operating since the mid '80s. And so we've got a lot of experience there.
And there's five different plans, or options, that are available to you, some more conservative than others. But those plans have produced, on average, over the last 10 years -- the one that grew the most slowly, if you will, the most conservative, has gone up about 4 percent per year. The most -- the one that's earned the highest rate of return is almost 11 percent a year over that period of time. Now to compare that to the rate of return that you, in effect, get on your Social Security when you pay into the regular Social Security trust fund, that's less than 2 percent.
Now it doesn't take a genius to figure out that 5 percent or 6 percent or 7 percent is better than 2 percent, especially when you add the compound rate of interest over time.
If you are, say, today starting out, a worker under this system we proposed, earning an average annual income of about $35,000 a year, by the time you reach retirement age, you'd have a nest egg of a quarter of a million dollars in your account. That would be there to supplement your Social Security. And it would be, net, a better deal than if you'd taken that same 4 percent and put it in at about 1.8 percent into the Social Security trust fund. So it's a better deal for the worker who has got the time and can take advantage of time value of money, in other words, the growth of that investment, if you will, over time. We think that's a good way to go. We think it makes sense not only because it would provide a better return for the individual worker, but it also, obviously, involves the element of ownership -- you own it, it's yours, nobody can take it away from you.
If you think about the way Social Security works today, let's assume you've got a man and wife working, both of them work, both of them pay into Social Security throughout their careers, and then they get ready to hit retirement age, and one of them dies. What happens to the money that's been paid into the system over that period of time? The surviving spouse doesn't get it, they get to choose. They can take the survivor's benefits that they would earn as a spouse of somebody who paid into the system, or what they earn themselves, but they don't get both.
And whatever you have paid into the system, if you're unfortunate enough to pass on, about the time you hit retirement age, you'd have paid in your entire career and you get nothing back -- nothing you can leave your kids, there's no survivable assets, if you will, there's no ownership of an asset the way there would be with respect to our personal retirement accounts. It's available for your family. It could be passed on to your kids. It's yours. You own it, just like you own a piece of your house or whatever other asset it is you've acquired.
We think that's an important concept, as well, too, and fairer, long-term, to a majority of Americans than the way the system works today. So that's another reason why we think it's important, and we believe deeply, given where we come from, in the whole principle of ownership. We want to see people own their own businesses, own their own homes, be able to own and have some control over more aspects of their lives, by, for example, giving them control and ownership over a portion of their retirement.
So there are, we think, positive values that would flow from that approach, in addition to the fact that it would be a better deal for younger workers, who otherwise are looking at a system where they're convinced there won't be anything there for them when they reach retirement.
Now, there are other ideas floating around out there, lots of good ideas that have been kicked around in recent years. We had a commission headed up a few years ago, 2001, by Pat Moynihan. Pat, unfortunately, has passed on. He was a Democratic Senator from New York. I knew him when he was our Ambassador to the United Nations, back during the Ford administration.
But he chaired a commission that coughed up a number of good ideas. We've had another commission working recently. The notions that are out there, by way of trying to close this gap, if you will, between what the revenue forecast is and what the benefit levels promised are, can involve such things as raising the retirement age. We did that in 1983. We phased-in gradually over time, you'll notice, that full retirement -- we've added about one month every two years to what the retirement age will be. It makes sense because we're all living longer. So that's one possibility.
Another is to index to survivability, if you will, another way to describe it. Early retirement, so it doesn't come at 62, but maybe it ought to come at 63. Those are possibilities that are being talked about.
We've seen, as well, proposals to raise taxes, to put more revenue into the Social Security system. Frankly, we're a little nervous about that one, because you've got to look at what that does to the economy. In other words, whatever we do in the Social Security arena has to be judged against what its overall impact is likely to be on the economy. We're already to the point where the payroll tax is the biggest tax for a lot of working Americans -- not income taxes, because we've significantly reduced the income tax burden on folks at the bottom half of the income level. And the bottom 50 percent of American wage earners pay only about 5 percent of the total income taxes paid in this country, because we've got a very progressive income tax system, which is good, but the payroll tax has become, as I say, for many folks, the biggest tax they pay.
There's a limit to how much you can ratchet up those rates before you begin to have a detrimental impact on the economy, and also a disincentive, if you will, to the creation of more jobs. Because remember, most of the jobs -- new jobs in America are created by small businesses, not the big corporations. It's the small businesses, the entrepreneurs, the start-ups that go out and create new jobs, where most of our job growth comes from.
And for those small businesses, especially, they've got to pay 12.4 percent in effective payroll, the net result, for every new job they create. And if we're going to increase those rates, say up to 15 percent, where you have, say, 7.5 percent rate on the employee, 7.5 percent on the employer, or for the self-employed, the small businessman or woman just starting their own account, that's 15 percent they have to pay themselves, right out of their own pocket. So we start to build in a disincentive for the kind of job creation we'd like to see in a strong, healthy, vital economy. So you've got to be careful what you do on the tax side, although that's an area that some folks are focusing on, as well, too.
One of the ideas the President talked about the other night -- I'll mention this, and then I'll stop and respond to questions -- is an idea that's been put forward by a guy named Pozen. Robert Pozen, he's an economist. He was part of the Social Security Commission. The way the system works now, with respect to Social Security, is that the payments are indexed, and they're indexed, in effect, on both the prices and the wages. Everybody understands, I think, the notion that we want somebody who is retired, drawing benefits to be able to keep pace with inflation. So some years ago, we indexed those retirements so that we make an annual adjustment to your Social Security check that accounts for whatever inflation has occurred over the prior year. It's a good idea, sound concept.
But we also -- in terms of computing future benefits, we also index to wages, and wages rise faster than prices over time; so that another way to think about is that if you are, say, 20 years old today, when you retire under Social Security, the way the law is currently written and set up, by the time you retire, your benefit will be 40 percent higher than the benefit of today's retiree after we account for inflation -- after we account for inflation.
That is to say, it's a good deal, obviously, if you're in your 20s today and you're going to be retiring 40 years down the road. But the way the formula works is, not only do we adjust for inflation, but we adjust for inflation plus wages -- and wages have been rising, on average, about 1 percent more per year than prices have.
That doesn't sound much, but when you -- sound like much, but when you compute it over a 30 or 40 year span of time, compounded on an annual basis, that 1 percent gets to be significant. And the net result is that today's 20 year old, under that formula, let's say, will retire with benefits 40 percent higher than today's retiree, even after you adjust for inflation.
So Pozen's idea is that we need to modify the formula. And what he's suggested is a sliding scale, in effect, at the bottom end -- folks at the lower end of the income levels who are going to be more dependent on Social Security than anybody else, would still get the same adjustment, that is, inflation plus the index to wages, in terms of computing their benefit. But at the upper end of the scale we would adjust only for inflation; there wouldn't be that extra kicker, that extra 1 percent over 30 or 40 years that gives you a significantly higher level of benefit. And then we'd have some sliding combination of both between the upper end and the lower end -- a progressive way to index benefit levels going forward. By progressive, we mean it will provide more for folks at the bottom end of the scale than the top end of the scale, people who have got other means and so forth.
The President suggested the other night in his press conference that that's something we need to look at. But if we did that, one of the outcomes would be that we could promise everybody who's going to retire in the future that their benefits would not go below what's being paid to retirees today, adjusted for inflation. And for those folks at the bottom end of the scale, they'd be able to retire -- because of that indexing to wages, they'd be able to retire at a level that would guarantee they don't fall below the poverty line. That's one possibility; in effect, progressive indexing, if you will, of the Social Security benefit.
So if we get good people together, working hard, thinking creatively about what kind of obligations we have out there and how we fulfill them, then we can do what needs to be done here. As I say, what needs to be done is for us to come together as a nation and get everybody to step up and put their ideas on the table, not attack anybody because they were courageous enough to put an idea on the table, and sit down and get the job done.
And, again, this isn't about people like me -- I'm 64. When I got my Social Security notice the other day -- you know, every year they send you a sheet from the Social Security Administration saying this is what you paid in and this is what you'll get at retirement; there was another notice there that says, remember, 90 days before your next birthday you have to register for Medicare. That was a bummer. I wasn't quite ready for that yet. (Laughter.)
But people my age are not going to be affected by this debated. The folks that are going to be affected are our kids and our grandkids. I've got four grandchildren, two daughters and they deserve for us to be responsible, to sit down and figure this out and figure out how we are going to deal with it going forward so that, in fact, they know there will be something there for them when they get ready to retire, that will provide that basic floor, if you will, that supplement, that add-on that guarantees that they'll be able to live and enjoy retirement and not suffer what so many Americans suffered in that period before there was a Social Security system.
So it's a worthy cause, something that needs to be done. It's something the President believes very deeply in; he gets a lot of advice, from a lot of quarters, saying, oh, why did you bring it up; you know, nobody out there is ready to stand up and salute. Well, we brought it up because we think it's important. We think it's our obligation, our solemn responsibility as President and Vice President of the United States, to say, here's a problem, folks, we need to fix it; here are some ideas, let's get started, let's have the debate. And doing the right thing, being Americans, believing in the future, believing in our obligation to future generations, there's no reason in the world we can't deal with this.
So I'm here today to urge all of you to do so. And with that, I'm happy to stop and take questions or comments or advice -- I can take it right straight to the top. (Applause.)
We've got folks in these attractive yellow jerseys out here with microphones, and if you'll catch their attention, I'll get to as many as I can. Number one.
Q Good morning, Mr. President [sic]. And as -- from a younger generation, sir, I'm just kind of curious, will Social Security survive till I need it? (Laughter.)
THE VICE PRESIDENT: I think it will. I've got -- I guess I've got a lot of confidence in the American people, and I know this President -- he's stubborn. (Laughter and applause.) He doesn't take no for an answer. I turned him down when he tried to make me Vice President -- look where I ended up. (Laughter.)
He -- and he believes very deeply that we do have an obligation to proceed, and he's bound and determined, as he's told members of Congress and just about everybody else who will listen, that he went to Washington to deal with big issues, not to play small ball, is the way he describes it, and this is a big issue. And I say, as I get out around the country, I find that there is great receptivity out there on the part of Americans from every walk of life, all across the country, nod their heads and say, yes, this makes sense, it's something we ought to do. They don't necessarily buy a particular option or they've got their ideas, but this exactly the kind of thing we ought to be doing with good, strong, effective government, and it's our job to address it, and I'm an optimist. Otherwise, I wouldn't be in this business.
Q Mr. Vice President, thank you for coming to Smyrna. We're honored to have you. My question is aimed towards that blasted baby boomer group. All the proposals I've heard have talked about raising our retirement age. And my concern is, if we are going to have individual accounts, or private accounts, which I strongly support, is there a possibility to index the contribution for the baby group that has a few more years to work but aren't yet protected by that 65-year-old retirement plan you talk about?
THE VICE PRESIDENT: What do you mean index? You mean --
Q Is it possible for us to increase our private contributions into the account --
THE VICE PRESIDENT: Oh, allow you to --
Q -- as opposed to a younger group?
THE VICE PRESIDENT: Sure. That's certainly something that can be debated. The way we've thought about it, and there's nothing hard and fast in the proposal we're looking at. I say, we've been focused on basically saying everybody 55 or over would continue under the existing system. You need to draw the cutoff someplace.
But I'm sure there are various possibilities that we can think about. Some people want to go more than 4 percent; we've talked about 4 percent instead of 5 percent. But maybe you'd go higher than that, perhaps, for a group and a window in there, a 5- or 10-year window because they wouldn't have as much time, but they'd be able to put aside more if they wanted to.
I mean, all kinds of possibilities ought to be looked at, and that's certainly one of them. I've had people complain because we didn't allow them; they were over 55 and they wanted in. And the way the program has been designed at this point, we hadn't made provision for that.
But I -- all of these kinds of possibilities need to be debated and discussed. Nothing's locked in concrete at this point.
Yes, number seven.
Q Mr. Vice President, under the private accounts plan, where will the revenue come from to support the current beneficiaries of Social Security?
THE VICE PRESIDENT: In effect, what you're doing here -- one way to think about how you would fund this, remember that $11 trillion I mentioned out there early on, that's what we call the unfunded liability in the program. It's an obligation the federal government has. It's money that's owed under the current law. One way to think about what we're trying to do here is to bring forward and pay now what is obligated to be paid later on, the funds that would be required, in effect, to set up the private accounts. In other words, we'd have the existing Social Security system out there cranking away as it is today, but we'd go ahead and borrow the money, in effect, to put into those accounts.
But it's a debt we already owe. And you may think about it. It's like advancing the house payments on your mortgage, that you're going to bring it forward and pay it now instead of paying it later. It doesn't actually increase the net indebtedness of the federal government compared to what it is today, but what you are doing is you're taking that obligation that is out there in future years, bringing it forward, paying it now and putting it on the books now. Right now, it's so-called "off-the-budget" but it's money we owe nonetheless. You bring it forward and pay it now as a way to get those accounts started. That's one option, one possibility.
People have looked at other possibilities. One is to raise the cap on the amount of the payroll, of your earnings that's eligible to be taxed. I mentioned it's capped at $90,000. There are proposals around to do that. Some people object to that on the grounds of what its impact would be on the marginal tax rate of certain people in our income stream. But there are different possibilities for coming up with a way to fund it.
But I think probably the best way, from my standpoint, to think about it is, it's money we owe, you're going to have to pay it sooner or later, it's an obligation of the federal government. Let's pull it forward and pay it now and let people begin to earn interest on that, on those personal retirement accounts, while we still cover the obligations we've got to those who are already retired drawing benefits.
Over here. Number six.
Q Mr. Vice President, thank you for coming to Georgia, and thank you and the President for your leadership in the war on terror. Millions of Americans appreciate that.
My question is, I watched the press conference the other night with the President, and it seems like when the two of you come up with serious ideas that those from the other faith, in the other party, all they do is demonize and, in many cases, just lie and try to divide the older generation, our grandparents from us, those in our 30s.
THE VICE PRESIDENT: I've noticed that. (Laughter.)
Q And just from -- my question is, what are you going to do from a political nature to stop them from just lying and trying to divide us, and protect those of us who really are depending on you guys saving this and protecting this? It seems like their message to our generation is they just don't care if we get it or not. That's what I hear from those that are constantly criticizing, is they don't care about us. And what's your message to them?
THE VICE PRESIDENT: Well, I do think -- I'm trying hard to be nonpartisan in my conduct. There are a number of members on the other side of the aisle that have quietly, in private moments, indicated a willingness to engage in debate, or a hope that at some point, it will be possible for them to come to the table. And the problem we've had is that so far the leadership on the Democratic side, both in the House and Senate, have basically said, absolutely not, we're not going to participate in this enterprise. I think that's a mistake on their part.
And as I say, I want to emphasize, there are good folks on the other side who do have an interest in getting this resolved, and I think eventually will be part of a national dialogue and debate to do exactly that. We just have to keep working at it and pointing out the fact that there is a problem here, that we are putting ideas on the table, that we do want others to come to the table and participate, as well, too.
And I think eventually, the American people will recognize that there is a problem here and that those of us in public service have an obligation to try to solve it, that the group or the party or the organization that stands aside and says there's no problem when obviously there is, or refuses to participate, I think over time loses the support of the American people.
They didn't send us back there to go to cocktail parties on Capitol Hill and go on recess. They expect us to earn our pay. There are issues that need to be addressed. And so I think there's -- a significant penalty, I think, will ultimately be paid if they refuse to engage and participate in this process.
Q Thank you, Mr. Vice President, for being here in Georgia. A simple question kind of dovetailing off of his, the regulatory part of this -- I think some of the fears that people have, after the recent burst of the bubble and everything, with the stock market and all, how can we assure our kids and grandkids that that money is going to be there? And who, in fact, is going to be watching over that for us? And I think that's probably one of the concerns I hear.
THE VICE PRESIDENT: Well, I think the best model to follow is the one I mentioned of the Thrift Savings Plan that the federal government operates today. And there -- I believe, there are five options and you can choose any one of those five options. Some are slightly more risky than others, but the greater the risk, the greater the opportunity for return. If you're primarily concerned about security, or if you're getting relatively close to retirement age, you're not going to have the advantage of 30 or 40 years. Because over 30 or 40 years, anybody who looks at it, obviously, it's paid in huge dividends to have been invested, for example, in the U.S. economy, which is what we're talking about here, or in some combination of stocks and bonds, if you want to be a little more conservative, or maybe shaded over more to the bond side of -- or even all the way to U.S. Treasuries, which are about as secure as you can get.
And so people would be able the make those choices. They're restricted, obviously, but they would be able, in fact, to choose among those possibilities. And the government, basically, would oversee the operation, so it would be tightly regulated. You're not talking about a heavy fund or fee that has to be paid to some stock broker on Wall Street. This is not about lining the pockets of anybody up in that part of the world.
And this is not -- I want to emphasize -- this is not a foreign concept. There are a lot of places around the country where state and local employees have operated under this kind of a system for several years. Back in the '80s, early '80s, several of them had the opportunity to opt out. So if you go to California today, or Texas, for example, the state employee programs there, they've been on this kind of a system for a long time, instead of Social Security. And they've done very well by it. And you can go look at it. There are track records there; the evidence is there. We know it works. We know with the right kind of management and choices made by the individuals, you're not going to have somebody lose their nest egg.
Today, as I say, if you pay into the system your entire working life and have the misfortune to die at age 62 or 63, nobody in your family is going to see those benefits. They're all going to go back into the system, because you don't own the asset the way you would here, where there's a personal account that is all yours, nobody can ever take it away from you.
Yes, number four?
Q Mr. Vice President, thank you for coming Smyrna. And one thing that I am curious about is, when you're talking about these personal savings accounts -- several things -- one is it changes the fundamental focus of the program from being a social insurance to a rate of return. And if you read the last trustees' report, one area that they talked a lot about was the increase of disability coverage, that that's an area that really is moving within the program.
As the President has been traveling around the country, he hasn't really addressed the other areas that Social Security covers. How are you going to address that, the increase in disability? And finally, what is your legislative calendar, where are you looking at implementing these changes? Because as you know this window of opportunity is slowly closing. And you need to get something done before you all leave office and move on to other things. Thank you.
THE VICE PRESIDENT: Okay. (Laughter.) Sounded like a challenge to me. (Laughter.) No, we have not at this stage addressed the disability issues. That is, we haven't proposed any change in the disability programs at this point. It may well be that it needs to be addressed or looked at, and that's entirely possible. But what we're proposing so far doesn't relate to, or address those issues at all.
In terms of timetable, the Senate Finance Committee has already had a week of hearings. The House Ways and Means Committee begins, I believe this week, with hearings. So both committees now -- Chuck Grassley, Chairman of the Senate, and Bill Thomas, Chairman of the House, are moving forward, bringing in experts, starting the legislative process. And out of that we would hope we can, working with them -- we obviously spend a lot of time there, too -- we'll have witnesses testifying, and work closely with the committees going forward to try to craft a bill that we can get out of committee and get to the floor. We'd like to get it done this year. We think the sooner, the better. And we think it's going to be easier to do something this year than it is if we wait until we get in the middle of a campaign cycle next year. So we're pushing hard to move it as quickly as we can.
But as the President said the other day, he said, I'm not backing off, and if I'm still hammering away at this my last day in office, I'm still going to be hammering away at this, because we've got to get it done.
Yes, back here, number three you got somebody.
Q Good morning, Vice President Cheney. I'd like to ask a question. This morning you've really delineated very well a lot of points in the program and what you and the President want to do. Could you delineate for us, because I think we have a little bit of an easy audience this morning on convincing us of this program -- could you delineate out a few other points from the other side, or the other faith, differences maybe in what you're saying this morning, and maybe what they're saying or not saying?
THE VICE PRESIDENT: So I get a chance to speak for the Democrats now. (Laughter.) My Dad, who was a lifelong Democrat, would be proud of me at this moment. (Laughter.) Probably wouldn't agree with me, but he'd be proud of me.
Basically, what we've seen, I think, on the other side -- they haven't really put forward any ideas by way of solving the problem. They have argued two points of view, I think: number one is, there's no crisis here, we don't have to address it now, the system is going to be okay for the next few years here, so we shouldn't address it. We just disagree with that. We think the time -- there's just a fundamental difference of opinion. We think now is the time to do it because we can do it and take the advantage of time. And the more you wait, the more abrupt the changes are going to have to be, and the more pain is likely to be imposed then.
The second option is, they've said they're opposed to personal retirement accounts and we've had -- it's interesting that they're operating on that basis. But Harry Reid, who is now the Democratic leader in the Senate, in 1999 was for personal retirement accounts, made a speech on the subject. So they've changed their position, partly I suppose, because now we're for personal retirement accounts and they're not.
I guess the important thing I focus on when I try to address their position is what if we do nothing, what happens? It is not a situation in which there won't be problems or penalty. In fact, if we do nothing, there's either going to have to be down the road, when the system goes belly up, because you've got all that red ink up there -- and you can see, as we get more and more people drawing more and more benefits for a longer period of time, sooner or later, there's going to be a train wreck. And at that point, the adjustments will be horrendous, because you'll either have a 27-percent immediate cut in benefits, or a massive tax increase that would do enormous damage to the economy.
And I think for them to argue the position they're arguing today is they're refusing to recognize that what they're advocating is a do-nothing policy is that train wreck that will occur down the road when the system goes belly-up.
Do I see Bill Usery out there in the audience? Bill? I don't know how many of you know Bill Usery -- Bill and I were colleagues in the Ford administration, when he was Secretary of Labor. It's good to see you here this morning, Bill. (Applause.)
Number four, you got somebody back there?
Q Mr. Vice President, it's a privilege to have you here today. My question is I do want to say that our group of Republican women that are here believe that Republicans rock. (Laughter and applause.) And my question is, since we've got a Republican President, a Republican Senate, and a Republican House, why do we not have more strong support in the House and the Senate? Present company excepted. We know they're strong for it. Why do we not have more -- more people that are behind this, Republicans behind it because it's such a solid program?
THE VICE PRESIDENT: Well, I think we've got good support on the Republican side of the aisle. I think there are a number of folks -- and I don't challenge their motives at all -- who have got good questions, tough questions. If this were easy to do, it would have been done a long time ago. It is hard to do.
And I think a lot of members have taken the attitude, which is perfectly appropriate, that they want to go home. They want to talk to their folks. They want to get a chance to go out and travel their districts and hold town meetings like this one, and have the opportunity to hear what people are saying. A lot of them have said to the President, look, Mr. President, you've got to go out because you've got the bully pulpit. You have the opportunity with the loudest megaphone to help educate folks to make them understand there is a problem here, and that it's partly our responsibility -- which we're perfectly happy to accept -- to sort of lay the groundwork, if you will, out there, create the conditions where members can step forward and sign on and be a part of this process.
And that's what we're doing. But I also think -- and a lot of us feel strongly about this. This isn't just a Republican program, or a Republican problem. This is something that all of us need to work on jointly, as Americans. And that involves Republicans and Democrats and independents because we've all got a stake in this system. It's going to affect us. It's going to affect our families and our kids, and that if we were just sort of a jam-down approach where Republicans come in and we stuff it, if you will, I think ultimately that's not going to have as much support as it will if we've got a broad base, a bipartisan basis for going forward.
As I say, the last time we had one of these debates, 1983, that's exactly what happened. And initially, we had a lot of people reluctant to do anything. What really precipitated action in those days was that we got to the point where we weren't going to be able to send out any Social Security checks because the system was literally going belly up. That's when we came together on a national basis and solved the problem. And that's what we need to do now.
CONGRESSMAN GINGREY: Mr. Vice President, I think we have time for one last question.
THE VICE PRESIDENT: Okay, number two.
Q Good morning, Mr. Vice President.
THE VICE PRESIDENT: Morning.
Q First I'd like to thank you for coming to Campbell High School. I teach science here, and I'm sure the entire school is very happy to have you here. So we appreciate your visit. (Applause.)
My question, though, being in Atlanta, you know you're in Neal Boortz territory. And I heard you speaking with him -- I believe it was a few weeks ago about -- this issue. And then one of the proposals that he's brought up is John Linder's fair tax plan, where the IRS is eliminated, where payroll tax would be eliminated, and the government could be funded through the 17 percent to 25 percent sales tax, I believe. I know you've said that you had been discussing this issue. The President has. How seriously is that something that the administration, the House, the Senate is ready to take and kind of push or look at? And if that was adopted, wouldn't that solve the solvency issue for Social Security, making the debate that we have now kind of moot, to where it would be funded? We wouldn't need to worry about any big changes at this time?
THE VICE PRESIDENT: Well, the -- I am familiar with John Linder's proposal. I sat down just in the last couple of months. There's a man from Texas whose name I'll think of in a minute. It starts with an L. And I had him in the office. I sat down and went through this whole thing with him. I've talked with him a couple of times. It's an interesting, fascinating idea. And we've got the commission that the President established on tax reform that's now working that will report later this year, that's chaired by John Breaux, the former Democratic senator from Louisiana, and Connie Mack, the former Republican senator from Florida, both now retired. But they're chairing a commission specifically to look at this whole question of reform of the income tax code.
And the President talked about it in his State of the Union speech. It's something we think is important. And certainly, we need to look at the Linder proposal for a flat tax. That makes a lot of sense. But it's also a very complex, complicated set of issues.
The concern, I guess, I have that a lot of people have, and that the President has is that we consume enormous amounts of energy in this country just trying to figure out what our taxes are and pay those taxes. We've got an army of tax preparers out there. And I don't mean to be critical of them. I love them. I can't figure out my taxes. I've got to have help. It's unfortunate we're at the point, though, that we've got more people preparing taxes than we've got in the United States Army. And it's a less productive enterprise in many respects. That's a lot of energy that goes into complying with an extraordinarily complex tax code. And we need to look for ways to simplify it and reform it. And that's one of the ideas that will be discussed.
I think we're generally reluctant, or at least I haven't seen a lot of argument on this point to have this substitute, as well, for the payroll tax that finances Social Security. Social Security has operated on the basis that it will be funded by the payroll tax. That's a fund -- a tax that's collected for a dedicate purpose, to support Social Security. And that's worked pretty well. And we're reluctant to get into the business of tapping general revenues to finance Social Security.
The concept of the trust fund, although it's basically IOUs from a bookkeeping standpoint, but I think also from a philosophical standpoint, I think we'd want to preserve that, although I'd be willing to listen to arguments.
Right now we've got our hands full trying to solve the Social Security problem. Once we get that done then we can move onto the tax code.
But let me thank all of you for being here this morning. Especially, let me thank my friend Phil Gingrey for hosting this, and for being willing to get involved and engage in the debate and also Tom Price and Johnny Isakson, the great work they do. Saxby Chambliss is another great senator from Georgia, and my quail hunting buddy. (Applause.)
And when I leave here, I'm going on to the Federal Law Enforcement Training Center down in Brunswick, I guess, and spend part of the day down there with Mike Chertoff, our new Department of Homeland Security Secretary. But we really appreciate your willingness to come today. This is an important issue, so I appreciate your understanding. And as I say encourage your friends and family. Get involved in the debate. You got ideas, or you've heard ideas you like or don't like, don't be bashful about letting us know about it because it is important. As I say it's something we've got an obligation to do for our kids and grandkids. Thank you all very much. (Applause.)
END 11:45 A.M. EDT