THE WHITE HOUSE
Office of the Press Secretary
PRESS BRIEFING
BY
DIRECTOR OF NATIONAL ECONOMIC COUNCIL GENE SPERLING
AND SOCIAL SECURITY COMMISSIONER KEN APFEL
The Briefing Room
2:30 P.M. EDT
MR. TOIV: As Mike promised earlier -- and I'm glad all of you have come back to hear this -- we have Gene Sperling, the President's National Economic Advisor; and Ken Apfel, who is the Commissioner of Social Security, here to answer any questions you may have on what just occurred.
MR. SPERLING: We'll spare you an opening statement.
Q A strong Clinton economy is going to take care of Social Security without anybody having to make any tough choices?
MR. SPERLING: Well, quite simply put, this is obviously good news. A strong economy pushes back the actuarial date three years. But what we face is not a modest or incremental solvency issue for long-term Social Security. We face a true generational deficit, a true demographic issue, the fact that we're going from 3.4 workers per retiree to only two workers per retiree.
And this President believes strongly that now that we have cured the fiscal deficit that before we use the surplus for any other purpose we should ensure that we have cured the generational deficit that now exists for long-term Social Security. And so our message today is that this is a good, a positive step, a positive event -- but it doesn't come close to closing the long-term challenge and it should just reenergize us that we have the opportunity to solve a major problem, a major challenge by acting early, and that the longer we wait, the harder this will get.
Q How do you know that it's going to change -- the question of demographics and so forth, of two persons supporting the one?
COMMISSIONER APFEL: Well, we already know because those people are all born. Basically, when the Social Security trustees assess the long-term projections they take into account demographics over the next 75 years.
Q But they're going to be paying, aren't they, into it, for years and years and years?
COMMISSIONER APFEL: Absolutely. But, basically, we know about the increase in the number of baby boomers, we know that the number of older Americans will roughly double over the next 30 years. There are projections in terms of fertility rates, immigration. So demographics are pretty well decided here. There could be modest changes at the margin, but basically, this is long-term demographic issues and those projections are not really under debate.
Q Gene, what happens to the economic forecast? Is this based solely on performance to date, or are you raising the productivity numbers, raising the wage inflation gap, any of those things?
MR. SPERLING: I'll let Ken answer because this actually is not the administration's forecast, this is the Social Security actuaries.
COMMISSIONER APFEL: Well, the trustees come out with three alternative measures. The intermediate assumption, which is the one that is traditionally used, over the next 10 years, has somewhat higher growth rates. The reality is that the major change and the increase of three years is due to the strong economy.
Q To date?
COMMISSIONER APFEL: To date, and projected into the future, with some modest changes in terms of last year's trustees report. If we look at real wage growth in this country, over the last couple of years it's been significantly higher than it has been in the past. That's been factored into the projections and it's factored into, at some level, into the short-term over the next 10 year projections. So it's based upon the performance to date, as well as the performance over the next 10 years.
Q So this is a bump in the next 10 years that increases the existing pre-funding that we have in the form of the trust fund and gives you more of a ride for the rest of the --
COMMISSIONER APFEL: That is exactly right. If we look at last year's trustees' report, we'd assumed about a $3 trillion fund peaking out around the beginning of the 2010, 2015 time horizon. That's now up to about $3.8 trillion based upon higher levels of growth, based upon the performance of the economy.
MR. SPERLING: I should point out that while President mentioned that the ultimate solvency date was moved back from 2029 to 2032, as you know, there are two earlier dates you've often heard, which is 2012, when the amount coming in falls below that which is going out. That date was moved to 2013. And then 2019, which is the point where the trust fund starts to go down, that date was moved to 2021. And so all three of the dates that are often used were extended.
And I think the growth changes were -- I think the Social Security trustees had estimated 2.5 percent growth for each of the last two years and it turned out to be 2.8 and 3.8 percent growth in the economy.
Q Is this fund still in the general fund? Is Social Security a part of the general fund?
COMMISSIONER APFEL: Well, it's part of the unified budget, but the Social Security trust funds are separate, individual accounts within the Treasury Department.
Q So what's your solution?
COMMISSIONER APFEL: Well, our belief is that we need a year of major public debate to talk to the American people about these choices.
Q What's your solution?
COMMISSIONER APFEL: I think that it's premature to lay out a solution at this point in time. The American public need to be involved in this discussion. This is their retirement system and I believe in my heart that there's got to be a major public discussion around this country about the various options that are out there -- about three things: the importance of Social Security in our lives -- and it is part of the fabric of this country -- two, the long-term demographic issues that face this country; and then, three, the pros and cons to all the different choices that are out there.
Q Well, the last time there was a crisis the American people -- I mean, it was a commission, wasn't it, that decided to increase the taxes?
COMMISSIONER APFEL: Well, back in 1983 -- before the 1983 reforms were enacted, there was a major public discussion that took place in '81, in '82 and in early 1983, about the different options that were out there. Every member of Congress was holding forums. There was a lot of public discussions about what to do about COLAs, taxing benefits, what revenues should be, what the retirement age should be. Some of that went on all around the country and it's helped set the stage for the actions that took place back in 1983. I think we need the same thing now.
Q Gene, on the commission -- Archer wants it, it seems to have a lot of Democratic support. We know the administration is not crazy about the idea, but why not just go along if there is this much interest in doing it?
MR. SPERLING: Well, as you know, we have bending over backwards to have as bipartisan a process as possible. And as you know, that, one, the forums that we have set up were being cosponsored by both AARP and Concord Coalition, which both have prominent Democrats and Republicans on their boards. When we did the forums the President at all times did them with the appointees from both Newt Gingrich and Majority Leader Lott, as well as the appointees from the Minority Leaders Daschle and Gephardt.
Even in the break, when the President did town meetings with five different satellite town meetings, three of them were in Republican districts. So we want to work in a bipartisan way and we are interested in working with them, with the Republicans on their ideas for how we could continue work in a bipartisan manner. And we are interested in new ideas from them.
We simply don't believe that a commission is necessary for achieving the bipartisan consensus that we would like to reach as quickly as possible after the election. We'd like a process that has the ability to move as quickly as possible after the election with maximum flexibility.
So this is not a ideological difference. This is not a partisan difference. This is an honorable and honest difference in what is the best mechanisms to bring the country together in a bipartisan process. But this is something that we're certainly willing to have discussions with them about and express our concerns and hear theirs, as well.
Q What's the big hurry after the election? And if it's such a -- if speed is such a consideration, why not start right now?
MR. SPERLING: You know, there's nothing hidden at all about our strategy. I think we've been about as open about it from day one. It is our feeling that the best -- let me step back. When we talked to the President, I remember just before he went on vacation in August, he said, what I want to know is what is the best way that we can actually get this done. And we, as an administration, the economic team with Ken and the President, we asked what is the process that we thought would best lead to a long-term Social Security fix.
And it was our feeling that reserving, making a strong -- having the President make a strong, bold statement on reserving the surplus was absolutely critical and a very important substantive policy statement that he's made that I think has altered the fiscal landscape for this year.
Secondly, that we had to elevate the issue and have the kind of public discussion that can refer to. Third, total practical analysis that our fear was that a legislative battle, or legislative battle on Social Security in the months leading right up to the election had the high risk that the issue could become partisan and too political, and that it could set back our chances for long-term Social Security reform.
So we made, again, a practical, tactical judgment that if we could reserve the surplus, elevate the debate, but then wait until after the election to try to bring people together, that was the best formula for getting long-term Social Security reform. That's just our best judgment. There may be other judgments out there, but it was one thought through very carefully.
Q Gene, a lot of people are going to say that this incremental good news does make it less risky and more attractive to try some experiments in privatization. Do you agree with that?
MR. SPERLING: What the President has said is that he wants a comprehensive Social Security fix that meets five principles: that it maintains the solvency well into the 21st century, number one. Number two, that it maintains the progressivity and universality of the current program. Three, that provides a benefit that people can count on. Four, that it includes the survivor and disability insurance we have now. And, five, that it maintains fiscal discipline.
But the President also said at the forum, when we was asked about ideas like individual accounts, as he said, that he believed that ideas like that should get a fair hearing and should be on the table, but only to the extent that they can fit within a comprehensive plan that meets his five principles.
Q But doesn't this news make it easier to fit within that plan and less risky to try something --
MR. SPERLING: I think there are enormous considerations on all sides and obviously this is going to be one of the issues that will be most debated. And our view right now is to be open minded, listen, give ideas a fair hearing; but we're not -- it is not our intention at this point to take a particular element and either bless it or dismiss it. Rather, we want to hear the debate and then in the end see which elements could fit into a comprehensive plan that fixes long-term Social Security.
Q You have been pretty dismissive of one idea, which is to save the surplus by putting it into either individual accounts or a pooled account with individual ownership.
MR. SPERLING: No, actually, we've been quite consistent in our message. What we said is we said, number one, we're opposed to any idea that drains the surplus prior to there being a comprehensive, long-term Social Security fix.
Q Isn't that saving the surplus for Social Security if you say, we're putting the Social Security surplus into --
MR. SPERLING: No, no. Let me finish. We do not believe that you should drain the surplus for anything -- we do not believe you should drain the surplus for any reason, or even element of a plan, until you have a comprehensive, long-term Social Security plan. So we would oppose any idea, whether we agreed with it or disagreed with it, that drained the surplus until we had a comprehensive Social Security fix.
As to that particular idea, what we've said is like other ideas, it deserves a fair hearing. We have not dismissed or blessed that specific idea. We've said that that should get a hearing as part of a comprehensive plan. But if somebody wants to drain the surplus for any reason prior to a comprehensive Social Security fix, then we oppose that.
And I don't think anybody has claimed that they have a way of draining the surplus prior to the election that would be a comprehensive Social Security plan that would fix the 75-year actuarial balance for Social Security and be a comprehensive plan. I have not heard one to date.
Q Gene, if I could ask you a question on a related matter. CBO says that it sees no April surprise in revenue streaming into the Treasury. Do you agree with that assessment and what would that imply for this year's surplus?
MR. SPERLING: Well, this has been an interesting year because, as you know, we generally speak on this twice a year with our mid-session and our budget. Obviously, this has been a year of great speculation. We have tried to stay conservative. I think that -- I don't think that we have a disagreement with their basic assessment of the numbers in April. We have -- it is our view that there will be -- likely be some surplus, but as to the exact number or how much, we would rather be conservative and reserve judgment, particularly at this moment when there's still a lot of envelopes being opened at the IRS from people who mailed their checks on April 14th or April 15th. So, I think that we don't disagree with the basic assessment that there does not seem to be a great surge in April beyond what was projected, but we have not given out a specific number. We may when we have -- we may if we have a better certainty, but as of today, we don't.
Q Gene, I wonder if you could try your hand at a question? I really haven't heard a persuasive answer on how a government can claim to be producing surpluses, as is now projected, when it's $5.5 trillion in debt. I mean, does a national debt of that enormous amount, how can you claim to have a $10 billion surplus or a $20 billion surplus?
MR. SPERLING: Well, the surplus refers to the unified deficit -- I mean unified budget, which is really for all the complicated numbers and budgeting concepts out there, is the purest form there is. It says how much comes in and how much goes out in that year. Part of what goes out in a particular year is the interest on the accumulated debt, and so one of the reasons why you get a negative cycle and you have rising deficits is that you're continually adding to the debt and, therefore, your interest costs are going up. And what we're seeing right now is you're seeing the positive cycle whereby projected lowering of the projected surpluses actually mean less debt, less interest rates, and therefore more or less debt.
So when people refer to the surplus, they are referring to the unified budget, how much comes in the year and how much goes out in a year. And it is -- as I think Alan Greenspan and others say -- it is the purest form of letting somebody know when you take away all the different mechanisms, is a government able to afford what it's paying out.
And so a balanced, unified budget does say a lot. It does say that you're taking in enough to not only pay for your current services but even on the interest on the debt that was accumulated prior to that.
Q But if you set aside that surplus for Social Security, aren't you essentially paying interest on an equivalent amount because you are not reducing the national debt by that amount?
MR. SPERLING: There are different forms -- there are different proposals out there right now for how to use the surplus for Social Security. Some of those -- almost all of them have the benefit of adding to national savings. Some of them, as discussed, would give --
Q What does that mean, adding to national savings?
MR. SPERLING: Well, if you think of it this way, let's say there's a $10 billion, $20 billion surplus this year, you have a certain amount of money. We could spend it, or we could save it. There's different ways to save it. One way would be to give people individual accounts. Another way could be simply to buy down the debt. You can buy down the debt in a way that benefits the operating budget, or you can buy down the debt in a way that benefits the Social Security trust fund. The point is, on either of those scenarios the government is borrowing less from the private sector.
Q But you would have to pay interest on whatever the amount of the surplus is if you don't diminish the national debt by that amount, correct? If you're setting it aside and really putting it in a bank somewhere or in the Treasury somewhere rather than diminish the national debt by that amount, you're paying interest on it, because you otherwise could have diminished the national debt by that amount. Is that not the case?
MR. SPERLING: Let me put it this way, when you save money there are interest savings out there. You could give those interest savings to individuals, you could give those -- through individual accounts. You could give those interest savings to the operating budget by just reducing the debt. Or you could give those interest savings to the Social Security trust fund by essentially transferring bonds over to Social Security.
So I think you have -- I think you're right in the following way: you can't double-count the interest savings. The economy as a whole benefits when we have higher national savings, but where that savings is allocated could have an effect on whether we are reducing the debt or not or whether we're just increasing individual savings. So people who talk about giving money to individual accounts would not be having as great a reduction in the national debt, because they would essentially be transferring those interest savings to individuals instead of to retiring the debt.
Q Do we care about reducing the national debt? We never hear anything about that in that sense.
MR. SPERLING: Well, you've had a dramatic turnaround. You had the national debt escalating upwards for years and years, and now we have the opportunity to actually start -- not only stabilizing but bringing the national debt down. And if we keep our fiscal discipline, we do have an opportunity to start bringing the national debt down.
Q But not until after Social Security is -- there's a resolution for that, because the President says not one penny would go for anything but setting aside for Social Security.
MR. SPERLING: Again, there's different ways of doing that. Some of the Social Security solutions could affect reducing the national debt.
Q When do you make that decision? Before the end of the fiscal year?
MR. SPERLING: I'm just repeating ourselves. We're going to wait. We're going to do the best we can to lead a bipartisan national debate and then do the best we can after the election to bring the parties together.
Thank you.
END 2:50 P.M. EDT