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MR. MATTHEWS: (In progress) -- difference between being courageous and being committed. A courageous person is willing to go on a suicide mission. A committed person is one who organizes it and is willing to lead the charge. It is now my pleasure to introduce you to committed Congressman Nick Smith of Michigan.
When we're talking about Social Security reform, he is the first person out there with the bill, ready to lead the charge in reforming this system. Congressman.
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Representative Nick Smith
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I was telling Pete that we've got a good chance, I think, because every member has young staff people and look, you're the generation that's most at risk. And I think -- Dorcas Hardy says that we could have less money coming in in revenues than is required for payouts as early as '25. That means it's not too long away -- too far away.
Let me just briefly go through my proposal. It's not God's gift to the perfect solution, but I have been working on Social Security since I first came to Congress two years ago. In my first two months I introduced my first Social Security bill. We worked about another two years on this. It took -- with Steve Goss it took about nine months to get it scored. Mine is the only bill that has been scored by the Social Security Administration that has been introduced in the House. And what I do is about seven modest changes. Instead of a few big changes what we do is a lot of little changes and we phase them in over the next 25 years.
I think we passed something out, right, that gives the highlights of the changes. Let me just go through some of them.
Steve, I see a transition -- the transition cost is a problem that we've got to deal with. If we're looking at some place between five and $9 billion for a transition cost, that means we could put the -- we need to put that money in the pot now and have it there.
One of the problems that I see as I go out on the campaign trail and at my town hall meetings is the fact that people don't -- think that if we just keep our hands off the trust fund we'd be okay. There's about $580 billion in the trust fund. Putting that in perspective, it would last about a year and a half in Social Security benefits.
We have private investment but we only use the surplus coming into the Social Security Trust Fund as the amount that would be allowed for the personal investment. It starts out at about 2.3 percent, and because of other changes, the surplus coming into the trust fund increases, so you'd end up with about up to 10 percent. We leave a government program in our bill -- we leave that two percent that goes into the insurance disability program as a government program. Steve suggests that maybe that could be private insurance and I think that's possible.
We put in the parameters of the private investment the IRAs. We incorporate by reference the language of the thrift savings account. Let me just briefly go through a couple of the other changes.
Currently as you know, the retirement age goes up two years. We add another year to that retirement age but as an offset to increasing the retirement age we say that the personal retirement savings account can be taken out as early as age 60. And you know, just an interesting note in history. When this started and the discussion went -- and the bill was passed in '34, '35, the Senate insisted on two different votes that private investment be an option to the government program, as long as they could assure that the private investment was made and that it wasn't taken out until age 65. It was only changed in conference committee, taking out the Senate suggestion that it be a private investment. And if you ever want to look at something fun in relation to what you can get out of that private investment if you had have put it in at that time, the same amount compared to what you're getting to Social Security, you're getting -- if we come up somehow magically with the money you're only getting a real return on your Social Security investment of about .9 percent.
Treasury Bills, and the reason everybody is suggesting that we go with a private investment, real return currently on that Treasury investment is 2.3 percent. That compares to an average over the last 90 years of about 99 percent in the equity bonds and equity stocks.
What I do is deal with some of the formula details that as you know, you take your average monthly earnings over 35 years and that ends up having a formula applied to it so that lower income -- lower income can have a higher percentage of their investment than higher income. I add an additional bend point that has the result of slowing down the increase in benefits for the higher wage income recipients when they retire. Very little effect, almost no effect on current retirees or anybody over 57 years old. I think it's something that at least we can talk about. Let's come up with improvements but let's not delay this. It's going to be tremendously easy after Republicans have experienced their Medicare problem in the last election to keep putting this decision off of how we deal with Social Security. Let's not put it off and a lot of people in this room are going to be key to make sure that we don't.
Thank you very much.
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