Jeb Hensarling

I’ve been digging into the positions of various members appointed by President Obama to the debt commission regarding Medicare and Social Security. I came upon a hearing held in 2005 by the House Financial Services Committee, and this interesting exchange between committee member Jeb Hensarling and Barbara Kennelly, the President of National Committee to Preserve Social Security and Medicare (Lexis/Nexis):

REP. HENSARLING: Ms. Kennelly, first thank you for your service to your country. I have a question in — looking in your testimony, you talk about, I guess for lack of a better term, what is it, hazards and vicissitudes of life in referring to, I guess, risk associated with personal accounts. But aren’t there a lot of risk to leaving our Social Security in the hands of Washington? We’ve been discussing the trust fund. Historically the trust fund has already been raided 59 different times, and we’ve had 20 different tax increases which means every time you’re putting in more money and receiving the same benefits, your rate of return is going down.

We decreased benefits, including the taxation, of Social Security benefits which you just alluded to. We currently have no ownership rights in our Social Security. We’ve had a number of Supreme Court cases attest to that. So maybe there are some risks associated with the market place, but aren’t there a whole lot of risk involved in leaving our retirement security in Washington as well?

MS. KENNELLY: Yes, the hazards and vicissitudes in life is a direct quote from President Roosevelt. We do have a real problem with savings in the United States and that’s why I’m glad you’re having this — this hearing.

And, you know, I think one of the best saving plans, perhaps maybe the only one we have right now, is Social Security. Every time we get a pay check, you and I, every two weeks Social Security is taken out of that pay check. And that’ll be there when we retire, and we can count on that. We can’t outlive, and it’s adjusted for inflation. So, no, I don’t think we should say — change the system.

REP. HENSARLING: Let me ask you this question. I guess you also alluded to the fact that you’re not in this business any more of having to come up with reforms, but as I understand current law, if this — if we do not act in 2042 we are looking at approximately a one third cut in Social Security benefits. Now, you say that personal accounts will lead to significant benefit cuts. But by not choosing a reform plan, haven’t you chosen the status quo, and the status quo I think by any account includes a huge benefit cut for, among others, you have three year old granddaughters. I have a three-year-old daughter. And aren’t we looking at massive benefit cuts for them if we do nothing under your plan?

MS. KENNELLY: No, I don’t think so because I think we’ve got a surplus to 2017 and I think all of you can resolve this situation before then. But if you look at what the president, we — he hasn’t laid out a plan, we know that. But what he has looked at is second commission plan and we see the cuts in benefits. And the guaranteed benefits, every dollar you put in to a personal account is taken out of your guaranteed benefit. And so, as a result, I have to tell you something. Some people forget it. The market goes up. The market goes down. And you cannot – what the president is saying, there’s a hope, there’s a hope that every young person will get more. Can I tell you something? That’s only a hope. It’s — what I say is, is the risk.

REP. HENSARLING: Well, let’s talk a little bit about the market. First, according to the Social Security Trustees, according to GAO, and just about anybody else who are replying on the matter, if we do nothing, today’s younger workers are either going to receive a benefit cut of about a third or they’re going to see their payroll taxes increased by 43 percent, or we can explore the president’s option of looking at personal retirement accounts.

Now, you allude in your testimony about the stock market, the stock market goes down;. And, indeed, it does; on a day to day basis, on a month to month, on a year to year. But I think with the exception of the great depression there has never been a four year consecutive period where the stock market has declined. And, indeed, the heritage foundation has done a study and it said that a 66 year old male worker who received $35,000 of salary, who as presently as he retires receive about $1500 in Social Security. Had he been allowed to invest half of his Social Security in a personal account and have stocks, have bonds over his working life, would be making three and a half times that, over $5300 had he been allowed to be in a personal retirement account.

I mean, right now that is — that is a much greater rate of return than Social Security is promising but cannot deliver. Why, if there’s only three choices on the table, massive benefit cuts, massive tax increases, are giving seniors greater retirement security with a rate of return that over 20, 25, 30 years of a working life will give them greater retirement security, why wouldn’t we choose that plan?

MS. KENNELLY: Well, first of all, Congressman, there’s not only three things on the table. There’s a number of adjustments on the table. Washington is full of adjustments. We’ve talked about them for years. And if you cobble those adjustments together — and they’ll be very difficult things for you to have to decide about. But if you cobble those things together, you can keep the traditional system.

Now, your gentleman that you’re talking about, maybe he would do better. But what I have to say to you is that Social Security was never meant to be an investment system, never meant. It was a safety net. It was a social insurance program. I know none of you like to hear that word but that’s what it was. That was so that people as they got older, after they — after they stopped working, they had income .

And, by the way, we’ve never heard in this room today the word disability. And I understand from the Commission and — and Congressman Penny was on the Commission. I understand they said, well, they only had six months. They couldn’t — they couldn’t adjust or they couldn’t address disability. And let me tell you something, one third of those people taking Social Security is not retirement. It’s survivors in…

REP. OXLEY: Barbara, time has expired.

Hensarling is now the second ranking minority member of the House budget committee.  Recently on Hardball, he was again touting privatization and cutting Social Security benefits, so time does not seem to have cooled his ardor.

Jane Hamsher

Jane Hamsher

Jane is the founder of Her work has also appeared on the Huffington Post, Alternet and The American Prospect. She’s the author of the best selling book Killer Instinct and has produced such films Natural Born Killers and Permanent Midnight. She lives in Washington DC.
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