Hearing of the Special Committee on Aging on Exploring the Economics of Retirement

Hearing of the Special Committee on Aging on Exploring the Economics of Retirement

OPENING STATEMENT OF SENATOR SUSAN COLLINS

Senator Collins. Thank you, Mr. Chairman, and thank you for calling this very important hearing.

I want to begin my comments today by thanking our distinguished witness for his public service. He has made so
many sacrifices over the years in order to serve the American people, and I want to thank him for his extraordinary public
service and also for giving us the benefit of his wisdom today.

Senator Craig mentioned that he was in Congress back in the early 1980's when what was known as the Greenspan Commission did the fundamental recommendations on reforming and saving Social Security. Well, I was not in public office at that time, but I was a Senate staffer at that time, working for Senator Bill Cohen. So remember that well. I was going to describe myself as a young Senate staffer at that time when I realized how many years ago, indeed, it was. But that commission was able to produce bipartisan recommendations really non-partisan recommendations, is a tribute to the leadership of our witness today, and it makes me wonder whether that is a model for our proceeding to face the very big challenges that we see today.

Social Security has been a huge success. It is our nation's largest and most poplar government program. More than 47
million Americans rely on Social Security, and for two-thirds of them, it is their major source of income. I think as we look
at how to preserve and modernize the system, we always need to remember that for many Americans, Social Security is the safety net that makes the difference between poverty and an adequate standard of living during their retirement years.

We also should remember that Social Security is not just a retirement program. It is also a disability insurance program
and a life insurance program that provides families of active workers with protection worth more than $12 trillion. That is
more than all the private life insurance currently in force.

Unfortunately, as successful as Social Security has been, we know that the system faces serious long-term financing
problems and is simply not sustainable in its current form. While the system is sound today, it will not be able to meet
its obligations to future retirees unless it is modernized.

Our Social Security cash surplus begins to decline in 2008. That is just three years from now. Generally when you have
heard discussion about Social Security, the focus has been on either 2018 or 2042, but, in fact, in just three years, the
cash surplus begins to decline, and that is because that is when the first of the baby boomers reaches age 62, the earliest
age at which Social Security benefits can be drawn and the age at which about half of those eligible to claim benefits have
done so in recent years.

In recent weeks, there has been a lot of debate about whether Social Security is facing, quote, a crisis or just
facing, quote, serious problems. Whether the system is facing a crisis or serious problems is really just a matter of
semantics, and I think it is a disservice for the American people for us to be spending time in the Senate debating
whether or not this reaches the level of a crisis when clearly all the projections show that Social Security is not
sustainable in the long run for our children and our grandchildren, and that is why I believe that we should start
dealing with Social Security's financing problems, because then the solution will be less disruptive.

But given the universal importance of this program, it is absolutely critical that we get this right. Any changes that
are implemented must be carefully thought out, thoroughly understood, and have solid basis of bipartisan support that
cuts across all age and income groups. As I look at the various proposals for Social Security reform, I want to make certain
that we preserve and, indeed, strengthen that safety net. I think we should look, for example, at increasing the minimum
benefit and having a guaranteed benefit, because the principle that we ought to endorse is that if you work your whole life,
you should not retire in poverty. That means looking at the adequacy of the minimum benefit as well as securing the
solvency of the system.

So, Mr. Chairman, thank you again. This is an extraordinary important hearing, and I appreciate your leadership.

BREAK IN TRANSCRIPT

Senator Collins. Thank you Mr. Chairman. Dr. Greenspan, your testimony provided an excellent overview of the
demographic changes in this country that compel us to act to ensure the future solvency of the Social Security system. One
of the recommendations that came out of the 1983 Greenspan Commission was an increase from the retirement age over a
gradual period of time from 65 to 67, and again this time, we hear a lot of experts saying in light of the fact that people
are living longer, we should take a look at a further increase in the retirement age to 68, 69, or even 70.

I personally have a lot of concerns about that because we have a lot of individuals in this country who work in
physically demanding jobs, and I wonder it is practical or realistic to expect them to continue working in their late
sixties. But I am wondering why there isn't more focus on the early retirement age of 62. We know that half of those who are
eligible do begin receiving benefits at age 62.

Should we be taking a look at the early retirement age as opposed to what seems to be an exclusive focus on raising the
age from 67 to some increased number?

Mr. Greenspan. Well, Senator, I think one of the advantages of having a commission with a staff who are experts on a lot of
these issues is to actually array all of the alternatives that are available. That is what they did for us in 1983. We had an
excellent staff. We now would presume that most of the people who are involved in taking early retirement are those in
arduous jobs. I am not sure all of them are by any means, but I am reasonably convinced that a significant amount of those
retiring from arduous jobs are probably getting more benefits in the sense that they tend to be in the, say, lower three
quintiles of the distribution, and what you could do is very simply to try to adjust, for example, for individuals who
choose to retire particularly early. You will find that their benefits will tend on average to be higher, but one of the
things that will show up no matter what you do is every particular fix on the problem we have is essentially unacceptable; and therefore, as I indicated previously, what you need is a recognition that these are all choices among relatively unfavorable outcomes, and we don't have the choice not to choose.

The problem is out there. What is forcing us is demography, and we cannot get around the fact that a very large cohort of
the American population will retire, and when they do, it will have very extraordinary effects on the finances of the system,
and therefore we must fix it, and every fix is unacceptable. So you run into a contradiction which gets resolved only by
recognizing it is not a choice of what you would like to do, but a whole set of choices of what you would least like to do.

Senator Collins. Thank you, Mr. Chairman.

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