similar civil rights protection against bullying and harassment as those that -- those that currently apply to students based on characteristics like race and gender. the legislation would also provide meaningful remedies for discrimination in public schools based on sexual orientation or gender identity, modeled on title 9's protection against discrimination and harassment based on gender. 50 years of civil rights history shows that similar laws that contain such remedies are often most effective in preventing discrimination from occurring in the first place. like other civil rights laws, the one we introduce today would prompt schools to avoid liability by taking proactive steps to prevent the

discrimination and bullying of students protected by the bill. i guarantee that when this bill is passed, nearly every school district in the country is going to go to its lawyer and ask how do we come into compliance? i guarantee you that the u.s. department of education will issue regulations, as it has under title 9, so the schools have guidance as to how to protect these kids. the goal isn't for any school to be sued for failing to protect kids from bullying and harassment. the goal isn't for any school to come under department of education scrutiny. the goal is for schools to do all they can to ensure that these incidents never happen in the first place. parents in minnesota and across the country entrust their

children to public schools with the understanding that these schools will do everything in their power to keep our children -- keep their children safe. when nine in ten lgbt kids are bullied at school, when they are three times more likely than straight kids to feel unsafe at school, when one-third of lgbt kids say they have skipped a day of school in the last month because they are feeling unsafe, then we know that our public education system is not fulfilling its most basic obligations to parents to keep children safe. and we have an obligation to do something about it.

yesterday, justin aaberg from our state of minnesota should have celebrated his 16th birthday. he should have celebrated with his family and his friends. but instead, i know his family and his friends will be missing him terribly. i knew they were yesterday and i know they still are today. no child should have to go through the pain that justin went through at school. no mom or dad should have to go through the heartbreaking pain that justin's family has gone through. it's time. it's time that we extend equal

rights to lgbt kids, lgbt students. we have the opportunity now as we reform no child left kind, the elementary and secondary education act, to include this legislation. our children cannot afford for us to squander this opportunity. i urge all of my colleagues to join me today in supporting the student nondiscrimination act and in demanding protection for all, all of our children under the law. madam president, i ask unanimous consent that the bill's text be included in the record. the presiding officer: without objection, so ordered. mr. franken: thank you, madam president. i yield the floor and ask -- suggest the absence of a quorum.

the presiding officer: the clerk will call the roll. quorum call:

mr. reid: mr. president? the presiding officer: the leader. mr. reid: i ask unanimous consent the equal of the quorum

be terminated. the presiding officer: without objection. mr. reid: i now move to proceed to calendar number 17, s. 493. the presiding officer: the clerk will report. the clerk: motion to proceed to calendar number 17, s. 493, a bill to re-authorize and improve the sbir and sttr programs, and for other purposes. mr. reid: mr. president, i have a cloture motion at the desk and ask that it be reported. the presiding officer: the clerk will report. the clerk: cloture motion, we, the undersigned senators, in accordance with the provisions of rule 22 of the standing rules of the senate, hereby move to bring to a close the debate on the motion to proceed to calendar number 17, s. 493, a bill to re-authorize and improve the sbir and sttr programs, and for other purposes. signed by 17 senators, as follows -- mr. reid: mr. president, i ask consent the names be waived, the reading of the names. the presiding officer: without objection. mr. reid: i now ask unanimous

consent the cloture vote occur immediately following the senate's action in executive session on monday, march 14. further, the mandatory quorum under rule 22 be waived. the presiding officer: without objection. mr. reid: i now withdraw my motion, mr. president. the presiding officer: the senator has that right. mr. reid: mr. president, i'm disappointed that i had to file cloture on a bill as important as this one. we were going to have a new day here in the senate. i just think that it's really too bad. this is the small business innovation bill. i know everyone knows we have had an open amendment process here. people can offer amendments on anything they want. i think this is really suggestive of maybe something that i don't understand. why wouldn't my republican colleagues want us to move to a small business bill, to help create jobs? we're told that 85% of all the jobs in america are small business jobs. shouldn't we be trying to help them?

that's what we have been working on. we haven't been doing all these things, these messages, cutting out programs for little boys and girls who want to learn to read, cutting pell grants for young men and women who are in college, cutting the ability of renewable energy projects to go forward. and all of these other messages that they're sending to the american people. we're here trying to create jobs. we have spent this congress over here in the senate on bipartisan issues, creating jobs. f.a.a., 280,000 jobs. we just finished within the last few hours the bill that will change the patent system in this country, that's needed changing for 60 years, and we've done that. and now they're blocking our

going to a small business bill, another bipartisan bill. senator snowe, the ranking member of that committee, has worked with senator landrieu to move this bill forward. why -- who's holding up our going to this very important jobs bill? i hope the republicans in the house are understanding what we're doing over here, creating jobs. with those two bills i've just mentioned, the patent bill and the bill dealing with the federal aviation administration, that's 580,000 jobs. 580,000 jobs. so i'm very disappointed that i have to file cloture on proceeding to a small business jobs bill. mr. president, i now ask consent that the senate proceed to a period of morning business, senators permitted to speak for up to ten minutes each. the presiding officer: without objection. mr. reid: i ask unanimous consent the senate proceed to executive session to consider calendar number 41, the

nomination be confirmed, motion to reconsider be laid on the table -- i'm sorry. the motion to reconsider be considered made and laid on the table, there be no intervening action or debate, and that no further motion be in order to the nomination, that any related statements be printed in the record, that president obama be immediately notified of the senate's action and the senate then resume legislative session. the presiding officer: without objection. mr. reid:: i ask unanimous consent on monday, march 14, at 4:30 p.m., the senate proceed to executive session to consider calendar number 10, that there be one hour of debate equally divided in the usual form and upon the use or yielding back the time the senate proceed to vote with no intervening action or debate on calendar number 10. the motion to reconsider be considered made and laid on the table with no further intervening action or debate, statements be printed in the record, that the president be immediately notified of the senate's action and the senate then resume legislative session. the presiding officer: without objection.

mr. reid: mr. president, i ask unanimous consent that when the senate completes its business today, it adjourn until 2:00 p.m. on monday, march 14. following the prayer and pledge, the journal of proceedings be approved to date, the morning hour be deemed expired, the time for the two leaders be reserved for their use later in the day. following any leader remarks, there be a period of morning business until 4:30 p.m. with senators permitted to speak for up to ten minutes each. fol÷ following morning business, the senate proceed to executive session, provided under the previous order. officer without objection. mr. reid: senators should expect two roll call volts beginning 5 clock:30 p.m. monday. the first on the confirmation of executive calendar number 10, nomination of james emanuel b boasberg to be a united states district judge for the district of columbia. the second vote will be on a motion to invoke cloture to the motion to proceed to calendar number 17, the small business reauthorization act. if there is no further business to come before the senate,

dislai it adjourn under the previous order, following the remarks of the assistant majority leader of the senate, richard durbin. the presiding officer: without objection. mr. durbin: mr. president? the presiding officer: the senator from illinois. mr. durbin: are we still in morning business? the presiding officer: yes, we are. mr. durbin: i rise to speak about the issue of interchange fee reform. last year congress enacted landmark reform of the swipe fees that visa and mastercard impose on the deb the debit car. the amendment i offered passed and was later signed into law. it was the first amendment i think out of the first 26 that was held to a 60-vote standard. every other amendment before was held to a simple majority. but i was lucky enough when i offered my amendment that there was an insince tans that we had to reach 60 votes. we did. 47 democrats, 17 republicans.

it was a vickly that came to wall street. because main streeted, the retail merchants, restaurants, convenience stores and many others had worked hard for this amendment. never before had visa and mastercard, the duopoly of credit cards in america, and their big bank allies lost a vote like this in congress. normally the card companies and the big banks are used to getting their way in this town. visa and mastercard have such power that they control over 75% of all credit and debit card transactions in america. last year $1.39 trillion was transacted on their cards. according to the american bankers association, the u.s. banking industry is a $13 trillion industry. that's trillion with a "t." many members in this body are being lobbied right now by banks

and card companies to repeal this law, to undo the interchange reform that congress passed last year. it is one of the most active lobbying efforts i've ever seen. i want to explain why interchange reform is so important. not just for the concepts of competition and transparency but also for the people and businesses affected. for small businesses and consumers and the american economy. a little back sph ground on the debit card industry. debit cards are simply a way for account holders to access funds that are stored in an account. thethey are the electronic versn after check. debit cards are issued by banks where the account is held. the cards are also part of a card network like visa or mastercard which sets rules and fees for using their cards. the banks can make money in several ways. they make loans based on deposits and earn interest, they

charge fees to consumers for maintaining and accessing accounts like a.t.m. monthly overdraft and transfer fees and they receive interchange fees for merchants every time one of their debit cards is used. if you look at any bank's web site, you can find the loan interest rates and the account fees that the bank charges customers. banks compete with one another for this consumer business. that competition keeps their fees in check. it's called the free market. but ask any bank to shoi on their web site where you can find the interchange fees that the bank charges merchants, restaurants, universities, charities, convenience stores and the list goings on -- ask them what they charge as an interchange fee for the use of their debit cards. the bank will say, well, you'll have to call visa or mastercard. that's right. card companies like visa fix the interchange rates received by the issuing banks, the banks that have their name on the card next to the symbol.

in other words, thousands of banks that compete with one another in all other aspects of business do not compete with one another when it comes to how much they pay in so-called swipe fees or ifnts change fees they get from merchants. the banks let visa set prices for all of them. sees have a visas has decided that every bank that issues credit cards will get the same rate as every other bank, no matter how efficient a bank is, no matter how much fraud a bank allows. rather than a competitive system, that is system which subsidizes inefficiency. in fact, the only competition in the interchange system right now is the competition between card networks to raise interchange fees. they raise the rates in order to get banks to join the network and issue more of their cards. now, it's easy to see why banks and card networks set up the system. it makes the banks happy because they get billions of dollars a year in high fees and they don't have to worry about competition.

it makes the networks happy because they get their own network fee each time a card is swiped and high interchange means banks will issue more cards. but it's unfair to those who are receiving the cards, for example the drants, the merchants shall the shops, the bookstorks universities, charities this a, the convenience stores, because they have no power to negotiate this fee. we want to know how much you are going to charge us every time you use a credit card? no way. visa and the bank spheab what that will be, the swipe fee. it is unfair to consumers telecommunicationly low-income and consumers without banking accounts who pay billions per year in hidden interchange fees that are passed on to them at higher prices for gas and groceries. how about that? i had some people in my office

today talking about the price of gasoline and they said, understand, every time a customer pews a visa or a mastercard, that they're taking a percentage of that cost on the gallon of gasoline and in order to have a profit to keep the lights on, their percentage keeps going up, we have to keep raising the price of gasoline to kipe with the credit card companies let alone the national oil companies. the federal reserve estimated that in 2009 about $16.2 billion was charged in debit interchange fees, over $16 billion in 2009 in interchange fees. a massive amount of money that's being paid to the banks by merchants adds and their customers, about $1.3 billion a month. i am going to get back to that number a moment. it didn't used to be that way in america. it isn't that way in many other countries that use visa and mastercard. back when the debit card system got started decades ago, debit interchange fees were minimal. it wasn't until visa entered the

market in the 1990's we started seeing debit card interchange fees that looked like credit card interchange fees. taboo different worlds here. when i use a credit card, ultimately the bank and credit card company have to collect from me. if i dodge them or don't pay, there is a loss. a debit card comes directly out of my account. there is no question where the money -- whether the money is there. it is already there. there is an excellent "new york times" article entitled "how visa, using card fees, dominates the market." i would like to insert the article in the record at this spot. the presiding officer: without objection. mr. durbin: it shows how visa leveraged its dominance in the credit card company to enter into and dominate the deb illiterate card descry. visa then changed the interchange fee so that it looked like the credit card fee. the result: the u.s. has the highest interchange fees in the world. we is also some of the worst fraud-prevention technology in the world.

this is because visa gives banks higher interchange rates for so-called signature debit card transactions instead of pen debit transactions. so the banks tell them to pay for signature debit even though far less fraud occurs with the use of pin numbers. many countries like canada have thriving debit card systems with diseer rough interchange fees. canada has low fraud. other places like the european union carefully regulate interchange rates to keep them to a reasonable level. but in this country, we have let dominant card networks -- and they are a powerful bunch -- take over our debit card system and they're driving that system on an unsustainable course. i've worked for years to reform interchange fees and by transparency, competition, and choice to the credit card and debit card industry. i first introduced this bill in 2008, 2009 joining with senator

kit bond of missouri to file a modest floor amendment to the credit card acted. the amendment said that interchina fees should be reported to the federal reserve and that visa and mastercard shouldn't be allowed to stop merchants from offering discounts. the card companies and bank industry hated that idea like the deaf devil hates holy wate. they used their standard talk ug points saying this amendment would hurt consumers, small banks, credit unions, the economy, everything they could think of. the amendment never reached a vote. instead, in 2009, the banks and card companies said they would support a study. we love to study things in wok washington. so congress delayed real reform and said, let's get on with the study. we will, last year i said enough is enough. i said, we can't continue to let visa, mastercard and the big banks use their price-setting schemes to turn their system in

their own little piggy banks at the expense of consumers. the amendment said if banks are going to let a card network set interchange rates for them, those rates must be reasonable and proportional to the cost of processing a debit transaction over that network's wires. why in the world would we bring the federal reserve in to establish a reasonable and proportional interchange fee because there is no competition in this market. visa and mastercard recently under investigation by the department of justice for a little too cozy relationship, visa and mastercard establish what these fees are going to be. they impose them on the merchants who many times have -- are told late in the game how much the fee s they don't bargain them. they can't shop. there is no competition when it comes to the establishing of interchange fees. this will end this inefficient subsidy that visas have a and

mastercard have created. the amendment directed the fed to implement regulations. the federal issued draft regulations in december. it is now working on final regulations to be completed in april and take effect in july. you know what they found, mr. president? their initial cut on thsm the average interchina fee is in the range of 40 cents and the average cost to use a debit card is about 10 cents. think of the overcharge that's going on with every single transaction. the next time you're standing in an airport and somebody hands a debit card to the cash year to pay for a pack of gum, think about that retailer just having lost money -- the only one who made money in the transaction was visa, mastercard and the issuing bank. last year when i was drafting this amendment, i knew we had to be careful about the way the reform would affect small banks and credit unions that currently benefit from the rates that visa and mastercard set. i didn't want to drive those small issuers out of the debit

card market so my amendment specifically exempted them from regulation. that means that now, just like before, networks will compete by raising interchange rates to win the business of that's smawcialtion underregulated issuers -- unregulated issuers. i know the small banks and credit unions are also lobbying on the hill saying that interchange reform will hurt them. for years they have been making this argument against any type of reform. mr. president, i've been on the hill for a while. in house and in the senate, i used to really believe there was a qualitative -- not just quantitative -- but a qualitative difference between community banks and credit unions and the big boys, the wall street banks. over the years i'm sorry to say, when it comes this these issues, their the same. it is just a quantitative difference. credit unions that i'm talking about here, community banks are smaller, but in terms of the way they look aishts, not a dime's worth of difference. and tbh comes in this issue -- and when it comes in this issue,

there is an interesting phenomena at work. visa and mastercard don't dare raise their head on capitol hill. if there are two more unpopular companies with american consumers, it is hard to think what they might be. maybe today it is oil cms. but it's a close second with credit card companies and the way they treat peevment so they don't come in and lobby. how about the wall street banks? you think they are real estate going show up heards and say, you can't regulate these interchange fees. two-thirds of the debit card come out of the biggest banks on wall street. not the community banks and credit unions. so the big money in this transaction is on wall street. but you don't hear from the wall street banks. why? because they're not going to win any popularity contests either. it wasn't that long ago we were shovelinshoveling billions of t' dollars to these banks. so they can't lobby, the big banks -- with the big money involved in this issue. the credit card companies can't

lobby because they have no popularity with the american consumer. so what do they do? they have some beards. the beards in these circumstances are the credit unions and the community banks, those specifically exempted are now coming to congress, coming to capitol hill saying this could hurt us in the future. wew a line that said if the asset value of the financial institution is below $10 billion -- $10 billion -- they're not affected by this law. there are, if i recall, only three credit unions in america with assets over $10 billion. the vast majority, overwhelming majority of credit unions in this country don't have anywhere near that kind of avet value. the same thing's true with community banks. so, wall street banks, credit card companies have found their great agents. their agents are the credit unions, community banks,

presenting their case to the members of congress as if they are directly regulated when they are specifically exempted from this. i know small banks and credit unions are working the hill. for years they have been using these arguments against any type of reform. when we try to get bankruptcy reform to deal with foreclosure a few years back, and i honestly think it could have had a dramatically impact, we exempted credit unions and community banks and they still lobbied against it. they are in concert when it comes to issues with the biggest banks in america. i don't understand it. it is a dramatic departure from where they have been historically. analysts agree the reform congress passed last year will give small banks competitive advantages over big banks. i'd like to insert in the record an opened by andrew card entitled never mind the

lobbyists. durbin amendment helps small banks. carr is a financial consultant who says what i've been saying for months. the argument small banks have been making against my amendment defy common sense. i also believe interchange reform is essential for consumers. banks will tell you consumers will be hurt by reform because banks will have to raise tpaourpl fees to -- consumer fees to make up for lost revenue. read the headlines for the past few years and you'll see that banks were raising consumer fees to record highs in 2008, 2009 and 2010 before my amendment became law. they're always looking for ways to raise fees on consumers as high as the market will allow. third, consumers are already paying for the current interchange system. soaring interchange fees are passed on to consumers in the form of higher prices for gasoline and groceries.

and the current system particularly hurts customers who pay with cash. i believe the consumers' benefit from transparency, competition and choice. the current interchange system has been designed specifically to avoid these features. that's why consumer groups agree with me and support the interchange reform which we have on the books. i know the financial industry lobbyists are out there now storming the halls of congress. they're saying let's delay the interchange feds rule making for a year or two. let's study the issue some more. study, study, study, study. this is one great study hall, this united states senate. but there comes a point when we need to act and we're prepared to act with the federal reserve in april and july. there is no need to delay these rules. read the comments i submitted to the fed about their draft rule making. you'll see how the new law provides reasonable time frames for implementing every part of the fed's rule. i saw this call for delay and study before on the credit card act back in 2009 and it doesn't surprise me that we're hearing it again.

if my colleagues remember nothing else, they should remember this, delaying interchange reform will have significant consequences to employers, small businesses, consumers all across america. not only will businesses, universities, government agencies and charities keep paying the current $1.3 billion per month in debit interchange fees, the fees will keep going up further. there will be nothing to constrain visa and master card from setting higher and higher fees. there is no competition in this industry. some of my colleagues say they're concerned about small banks and consumers. so am i. that's why i drafted the amendment to exempt them. independent analysts and consumer groups agree that the reform we passed protects small banks and colleagues. i say to my colleagues don't tell me you're worried about small banks and consumers and then push for a delay that will serve to provide $1 billion a month in more fees primarily to the largest banks in america. a delay in this implementation

would give visa and master card and big banks a multibillion-dollar handout. have we heard this song before? while leaving merchants and consumers worse off than they already are. i'm not going to sit by and let big banks and card companies get away with trying to kill this reform. they have been bailed out enough already. i urge my colleagues in congress don't bail out the big banks on wall street another time. once in a political lifetime is enough for most of us. i'm standing with the consumers and merchants on this issue, and i hope my colleagues will join me and find it's a good place to stand. i yield the floor and suggest the -- i don't suggest anything, mr. president. the presiding officer: under the previous order, the senate stands adjourned until 2:00 p.m. monday, march 1 to begin considn

of that bill early next week. mr. president, it's time once again for us to get down to business. yesterday's budget votes didn't brings pwr*eu us any closer to -- didn't bring us any closer to a conclusion but it did bring one thing to our minds and it did that clearly. that lesson is this: one party alone cannot reach a resolution without the other party's consent. we sroetd on a -- voted on a republican proposal and the democratic proposal. neither vote came close to

passing but the exercise wasn't in vain. we demonstrated publicly and on the record that we know that the answer lies somewhere in the middle. now it's time to find that answer and a budget that will reflect our values, keep the country running and create jobs. i can speak only for my caucus when i say we accept the lessons of yesterday's vote. we know we'll have to make a sacrifice to each consensus and we're willing to do that. republicans have to be willing to move their position also. perhaps they're willing to finally acknowledge, given our deep debt, we can't afford government giveaways to millionaires and companies making big profits. mr. president, perhaps republicans are willing to offer more reasonable cuts the democratic caucus can support. by reasonable cuts, i mean cuts that don't arbitrarily kick head start students out of class or rob college students of their

pell grants. both cuts the senate resoundingly rejected yesterday. what i mean is that these cuts that don't pull the plug on renewable energy jobs or cuts that fire thousands of workers at community health centers across the country. republicans should be willing, mr. president, to look at our country's substantial budget and find cuts more worthy than those that would weaken law enforcement, border security to keep us safe. i hope they'll join democrats in saving money by attacking waste, fraud and abuse. i hope they will join us in making tough choices in avoiding the temptation to making counterproductive cuts. let's come together in a way that strengthens our economy. let's cut in a way that makes our neighborhoods, schools and borders stronger, not weaker. as the negotiation process begins anew, i remind my republican friends time is short. i also remind them that the deadline we face a week from tomorrow is a deadline that they set. we didn't set it.

democrats warned from the start that the process would take a month. republicans would agree only to a period half as long as that: two weeks. those two weeks are up, as i said, next friday. so my message is this: our republican colleagues, you should set the deadline and the responsibility meeting it is as much yours as it is ours. both parties also share the responsibility to be reasonable. so let's get to work. we cannot negotiate this in the media. we cannot negotiate this if we're unwilling to give any ground. we cannot be stubborn and expect a solution. it's time to negotiate in good faith. it's time for all political posturing to end. and it's time for pragmatism, which is long overdue. mr. president, i would also say to my friends in the house, the senate has produced two very, very strong jobs bills. one is the f.a.a. reauthorization, which is long overdue.

it is a bipartisan bill, passed overwhelmingly here in the senate and would save or create 280,000 jobs. pretty good step in the right direction. over the last 24 hours we passed the patent reform bill. that will create 300,000 jobs. these two jobs bills need to be completed by the house of representatives so we can send them to the president. these two jobs bills are important. the house should focus on jobs, not these arbitrary cuts that they have been making. i repeat, i would hope that the house would right away work on our jobs bills that already passed the senate. k that the quorum call be f.a.a. dispensed with. the presiding officer: without objection, so ordered. mr. sessions: mr. president, we had two important votes yesterday on what we're going to about the surging set that this

nation is incurring and the dangers that debt poses to the future health of our economy, prosperity of our people, the employment of our people. we had a debt crisis, financial crisis in 2007, and we still haven't recovered from it damaged us. it damaged american individuals. there are people employed -- unemployed today in large numbers because of that and we haven't yet recovered from it. we have some growth, but we have not come out of it. and we've got to deal with that in a serious way. so the proposal was, as passed by the house, to reduce the spending for the rest of this seven months in this fiscal year ending september 30th, b by $61 billion and our colleagues in the senate proposed to do nothing, basically, $4.6 billion

reduction in spending over the rest of this fiscal year. that's an unacceptable number. perhaps we can disagree over where cuts ought to occur, but it's critically important at this time in history as i will discuss that we take real action that sends a message. and that actually saves money. not washington speak about saving money, but real savings in money and we can do that. every city, county and state is doing that all over the country and far -- and far bigger deductions in spending than we're discussing here. so the house proposal was to reduce discretionary spending spending, $61 billion, which is about 6% reduction in the plan and spending level. that's not going to -- planned spending level. that's not going to destroy our

country. it's still well above the levels we were spending in 2008. but that $61 billion, when calculated over 10 years, because it reduces the baseline of our government spending -- when we calculate our net savings of $862 billion counting interest. because it's at $61 billion every year plus the interest. and we pay interest on the debt we're running up. this year we started out projecting a $1.3 trillion deficit this year, the largest in the history of the republic, but now the scores have gone up and we're looking like ove over $1.6 trillion. $1,600,000,000,000. we take in $3.8 trillion -- just get this -- we take in -- no, we spend $3.8 trillion, but we're bringing in only $2.2 trillion. this is why 40% of what we are

spending this year is borrowed. we have an opportunity now, this c.r. is it. we need to reduce spending now. you say, well, we can wait. we don't want to reduce spending for some of our favorite programs. this is damaging. we hear the old speeches that sound like they were given 20 years ago about any proposal to cut any spending level as seen as some total disaster suggesting the republic will cease to exist. and, of course, americans know that's not so. they're not buying that. what world are we in? the president submits a budget that basically does nothing but continue the increase in spending. we just had the state department in the budget committee, i'm ranking republican on the budget, they're asking for

a $10.00 -- 10.5% increase in state department spending. the department of education was in last week, they want 11%. the department of interior was in, the president proposed a 9.5% increase in their spending. increases, 2012, that's their proposal. what world are they in? what about transportation? you know what they proposed to increase transportation by? $62 billion excuse me -- 62%. this -- this -- what world are we operating in? all right. you say you just exaggerating, it's business as usual, we don't have to make any changes. we need to make investments, sessions. this country needs to have more

investments. the state department had a 33% increase in two years. education department's had a 30% increase. i mean, when does it stop? if you reduce some of the increases that's been obtained is that some real cut or is it just moving back to a more sane level? that's what it is. but when you don't have money, you have to make tough decisions. so, again, the question is, are you just raising this politically? you're just trying to make a political point or is it really something here that's happening in america that's dangerous and requires us to take this step whether we want to take this step or not? are we required to? is it real? do we have a crisis that's dangerous for us?

this is what mr. erskine bowles, mr. bowles was president clinton's chief of staff. he was appointed by president obama and co-chaired the debt -- debt commission that did their report. this is what he said the day before wed. both of them -- yesterday. both of them. this was a signed joint statement to the budget committee the day before yesterday. "we believe that if we do not take decisive action, our nation faces the most predictable economic crisis in its history." close quote. are these extremists? they spent months studying the crisis the nation is in, what it takes to get us out of it. they proposed some substantial changes in what we are doing.

and just yesterday they said, we're facing a crisis, the most predictable this nation has ever faced in its history. in other words, you can see it coming. people say, oh, i -- it won't happen us to. well, they should probably pick up the book, "this time it's different" by professor rogoff at rinehart, i believe, one of the great universities. their book proposes and shows how governments, sovereigns get into financial trouble and how quickly bad things can happen and the title it should tell you something. the title is "this time it's different." and the title suggests that all of these great financeers and these countries that ran up too much debt never thought it was going to happen to them. and when people raised questions they said, don't worry, this time it's different.

well, is this an extreme book? is this a dangerous book? because they say that when your debt, based on history and worldwide studies, reaches 90% of your total economy, your total debt reaches 90% of your g.d.p., your economy on average loses 1% growth and is at risk of a -- a catastrophic adjustment. some sort of crisis. well, what percent of g.d.p. are we now? we've gone over 95% and the experts tell us that by september 30th, when this fiscal year ends, we'll be at 100% of g.d.p. so is this some sort of fearmongerring talk or are we dealing with reality? are we really seeing a -- facing a crisis that we can see in front of us? mr. geithner, the secretary of the treasury, unlike the budget

director, also testified before the budget committee, mr. geithner was more tbrang frank. when asked, did you agree with the rogoff study, is it a sound study? wre, i believe it is. and then he said this, frankly, i think it understates the risk. understates the risk. when asked about that, he said, basically, there can be systemic immediate shocks that occur that are unple unpredictable like in7 when we went from a boon to a bust. these things happened in greece, ireland, iceland. these things can happen in this modern world of electronic financial transfer very, very quickly. now, i -- i believe we can prevent this. i believe we can prevent it. but we've got to take action or we're heading in the wrong direction. well, did you notice the news yesterday?

bill gross, who runs the world's biggest bond fund at pacific investment management, a tota total -- the big bond fund -- announced that they had totally eliminated u.s.-government related debt from their flagship -- ship fund. "as the united states government projected record deficits." so that's a big development, frankly. i mean, he manages more money than anybody in the world, i guess, in the history of the world. he's eliminated government debt from the total return fund. and that was just announced. so is that something we should be concerned about? i think it is. because who's going to buy our debt? who will buy our treasury bonds

at now 10-year bonds at 3.5% or so interest? people get worried about your debt. they sell their bonds, who's going to buy them? where are we going to get people to -- to buy our bonds without paying higher and higher interest rates? and -- well, we're -- is our crisis coming upon us? let me share with you the testimony that mr. simpson and mr. bowles gave to the budget committee just two days ago. this is what mr. bowles said, co-chairman appointed by president obama. he's very wore wrid. " -- worried. "this problem is going to happen. it is a problem. we're going to have to face up to in maybe two years, maybe less. maybe a little more." close quote.

he's talking about a crisis. he said it's the most predictable crisis the nation's ever faced. he's pleading with us to get off the course, the unsustainable path we are on. and then what about alan simpson, a great, distinguished senator from wyoming who's so frank and articulate in his expressions. he's always a delight to hear. this is what he said -- quote -- "i think it will come before two years. i'm just saying at some point i think within a year, at the end of the year if they -- the people who hold our debt -- just thought you're playing with fluff, 5%, 6%, 7%, they're going to say 'i want some money for my favor.' if there's anything guys love, it's money. and money guys when they start

hraougs money -- start losing money panic. and let me tell you they will, it won't matter what the government does then, they'll say i want my money. i've got a better place for it. just saying for me, it won't be a year. do we have a time agreement? the presiding officer: the time expired some moments ago. a limit of ten minutes. mr. sessions: i thank the chair and wrap up and ask for two additional minutes. the presiding officer: without objection, so ordered. mr. sessions: let me add a few more things that have happened. in an analysis -- this is "the washington post," late january -- quote -- "in an analysis of the u.s. debt last week, s&p, standard & poor's, said the

unthinkable could occur unless the u.s. officials take action. it goes on to say -- quote -- "the u.s. officials must act quickly to control government deficits or face slower growth or even more difficult choices in the future. the international monetary fund said thursday in a report criticizing the tepid u.s. response to the rising debt. admiral mullen, chairman of the joint chiefs of staff, i believe that our debt is the greatest threat to our national security. close quote. secretary hillary clinton, secretary of state in the obama administration, quote, skater hillary clinton weighted into the debate calling the deficit a measure of weakness internationally. quote, clinton says the deficit is a national security threat. it was 1.3 when she said that.

the deficit now is 1.3-plus. secretary geithner, as i indicated, said the same. mr. president, we've had a debate. we've had ten democrats. the effect from the democratic bill that did nothing saying we needed to go further. two republicans defected, one independent defected probably thought it was cutting too much. but the majority of people seem to be saying we need to reduce more. i suggest our leaders get together, if there's a disagreement about where the reductions ought to occur, so be it, let's work that out. but we need to reduce spending significantly. the house number, in my view, is a minimal amount. i believe it will send a message to the world that this country is willing to take action, even tough action to get off the unsustainable path we are on. i thank the chair and would yield the floor.

mr. sanders: mr. president? the presiding officer: the senator from vermont is recognized. mr. sanders: mr. president, i'm going to try to bring this budget debate down to earth and talk a little bit about the reality of what's happening and go beyond -- there will be a lot of numbers that are out there. my good friend from alabama who sits with me on the budget committee makes the point that this country has a severe budget crisis. and he is right. he is right. the question is: how did we get to where we are today and how do we go forward in a way that is fair and responsible to address this crisis? and in that regard, the senator from alabama and i have some very strong disagreements. how did we get to where we were -- where we are today when

not so many years ago, the day that george w. bush became president, we had a significant surplus? we had a surplus when clinton left office. now we have a major deficit crisis. well, there are a number of reasons. number one, against my votes, we are fighting a war in iraq, which by the time we take care of our last veteran is going to cost us some $3 trillion. the war in iraq. i didn't hear any of my republican friends saying we can't go to war unless we figure out a way to pay for that. number two, my republican friends for years have been pushing huge tax breaks for the very, very wealthiest people in this country. i didn't hear them ask how that was going to be paid for. number three, under president bush, with strong republican

support against my vote, congress passed a $400 billion-plus medicare part-d prescription drug program written by the insurance companies and the drug companies. drove up the deficit. number of course against my vote, congress voted for a massive bailout of wall street. didn't hear too many people talking about how can we pay for that? $700 billion to bail out wall street; didn't hear them arguing that it was too much money, would drive up the deficit. now, the republicans yesterday, mr. president, brought forth and voted on h.r. 1, and almost all of them voted for it. and those that didn't actually wanted to go further. now, the main point that i want to make this morning is, a, we do have to address the deficit crisis. but, before, we have to address it in a way that is fair and is

responsible, and not solely on the backs of working families, the middle class, the elderly, the sick and the poor. that is immoral. that is wrong, and that is bad economics. to my mind, it is absolutely absurd that when my republican friends talk about deficit reduction, they forget to talk about the reality that the wealthiest people in this country today have never had it so good, that the effect of the real tax rate for the richest people in this country is the lowest on record, and that the wealthiest people in this country -- the top 2% -- have received many, many hundreds of billions of dollars in tax breaks. so i ask my republican friends, why do you want to balance the budget on the backs of low-income children, low-income senior citizens, those that are

sick, those that are vulnerable without asking the wealthiest people in this country who have never had it so good to put one penny -- one penny -- into deficit reduction? i think that is wrong, and the american people think that is wrong. when we talk about deficit reduction, we have got to talk about shared sacrifice. everybody playing a role. not just little kids, not just the elderly, not just the sick. but even dare i say it, people who have a whole lot of money and who have never done so well. mr. president, i have not been impressed at how the media has been covering this issue because i think they have not made it clear to the american people how devastating the cuts are that the republicans want to impose on working families. let me just very briefly tick

some of them off. the republicans want to throw over 200,000 children off of the head start program. every working family in america knows how hard it is today to come up with affordable child care, early childhood education. we have the highest rate of childhood poverty in the industrialized world. republican solution is slash head start by 20%, cut 200,000 kids off of head start and lay off 55,000 head start instructors. mr. president, you well know that the cost of college education today is so high that many young people are giving up their dream of going to college while many others are graduating deeply in debt. republican solution? slash pell grants by $5.7

billion and reducing, reduce or eliminate pell grants for 9.4 million low-income college students. middle-class families, working-class families, you hear that? we're going to balance the budget by either eliminating or lowering pell grants, the ability of young people to go to college, for over 9 million college students. now i know in my office we get calls every week from senior citizens, people with disabilities, widows who are having a hard time getting a timely response toward their social security claim. it takes too long to process the paperwork. what the republicans want to do is slash the social security administration, the people who administer social security for seniors, for the disabled, for widows and orphans by $1.7 billion. and that means 500,000 americans

who are legally entitled to social security benefits will have to wait significantly longer times in order to receive them. mr. president, we have 50 million americans with no health insurance today, 45,000 americans die because they don't get to a doctor on time. last year i worked very hard with a member, many members of the senate to expand community health centers so that more and more low- and moderate-income people could walk into a doctor's office, get health care, dental care, mental health counseling. republicans want to slash in h.r. 1, the bill they voted for yesterday, they want to deny primary health care to 11 million americans, at a time when state after state is cutting back on medicaid. what are you supposed to do if you're 50 years old, you have a pain in your chest, you don't have any health insurance? where do you go? and republicans want to deny

health care to another 11 million americans. mr. president, for the poorest people in this country, community services block grants provide the infrastructure, the ability to get out emergency food help, emergency help to pay the electric bill, liheap, they are the infrastructure in this country that protects the poorest and most vulnerable people. republicans want to slash $405 million from the community services block grant. that is wrong, and the president's proposed cut to the community services block grant is also wrong. we have in real terms 16% of our population today, our workforce is really unemployed. if you add together the official unemployment, those people have given up looking for work. those people who are working part time want to work full time. republicans want to slash $2 billion in federal job-training

programs. republicans want to slash $400 million in liheap. in liheap. that is the program that in my state and all over this country enables people to stay warm in the wintertime. we have a lot of senior citizens in the state of vermont getting by on $13 thousand, $14,000 a year income. they need help. it gets cold in vermont. it gets 20 below zero. you've got to stay warm. people don't have the income. liheap has been a very valuable tool. republicans want to slash $400 million from liheap. they want to slash the e.p.a., environmental protection agency, by 30%. these are the people who have successly enforced the clean air act, the clean water act, so that the air we breathe doesn't give us asthma, doesn't provide us with a soup which makes us sick. the clean air act has been an

enormous success in cleaning up our air. the republicans want to slash that by 30%. republicans want to cut the women and infant nutrition programs. this is the program that provides the -- the w.i.c. provides the -- the w.i.c. >> it supplied supplemental nutrition programs for women, infants, and children. they want to cut that by $750 million. poverty in america is increasing. women and little kids do not get good nutrition. the births might be low rate or the little babies might come down with illnesses if they don't have good nutrition. yet, the republicans want to cut the program by $750 million, 10%. title i education funding. republicans want to cut $5

billion from the department of education. on and on and on it goes. now, what do i think? do i think it's appropriate that we balance the budget on low income women and infants who need nutrition? do you think we should throw kids off the head start program, cut the social security administration severely, cut planned parenthood that has done such a good job of preventing unwanted pregnancies? does that make sense? i don't think so. it's not good for america, but we have to move towards a balanced budget, so what's a good way forward to avoid cuts on the most vulnerable people in the country. we have to begin talking about revenue, not just cuts. mr. president, today, i will be introducing legislation which

does two things. number one, it creates a millionaire surtax which will be used strictly for deficit reduction. it will be a 5.4% surtax on income over $1 million. all income, all households with income over a million dollars pays a 5.4% surtax on that income which will go into an emergency deficit reduction fund, just doing that, asking millionaires to pay a little bit more in taxes after all of the huge tax rates they have received, will bring in approximately $50 billion a year. now, mr. president, i think that that is a good idea, but it is not just me who thinks it is a good idea. recently last week, there was an nbc news wall street journal poll, and they asked the american people on what's the

best way ongoing forward on deficit reduction? 81% of the american people believe it is totally acceptable or mostly acceptable to impose a surtax on millionaires to reduce the deficit. the american people get it. they understand you can't move toward deficit reduction just by cutting programs, the working families, middle class, the low income people need to survive in the midst of this terrible recession. they understand that serious responsible deficit reduction requires shared sacrifice. it is insane, and i use that word advisably. it is insane to talk about deficit reduction as my republican friends do on one hand and then say, oh, yeah, we have to give hundreds and hundreds of billions of dollars in tax rate to the top 1% or 2% when those guys are doing

financially well and there's a tax rate lower than in decades and received huge tax breaks already. why does anyone think it is moral or right to move toward deficit reduction on the backs of the weak and gullible? i understand, and i know something about politics, i do understand that the parents of kids who are in head start do not make large campaign contributions, and i know that the senior citizens of this country who need help with social security do not make large campaign contributions. i understand that. i understand the college students desperately trying to go through college on a pell grant do not make large contributions, but there's a sense of morality to deal with, and i think it makes no sense, immoral, and it's bad economics to balance the budgets on the backs of working families giving

tax breaks to the people who don't need it. mr. president, we will be introducing a piece of legislation which i hope will have strong support. i think it paves the way for us to go forward in serious deficit reduction in a way that is fair. do we need to make cuts? absolutely. absolutely. do we also need to ask the wealthiest people in in country to start contributing towards deficit reduction? i think that we do, so once again, the legislation i've introduced today creates a millionaire's surtax of 5.4% which would bring in about $50 billion a year to be used exclusively for an emergency deficit reduction fund, and we also end tax breaks for big oil and gas companies bringing in about $3.5 billion a year. over the past decade, the five largest oil companies from the united states earned nearly a

trillion dollars in profits. meanwhile, in recent years, some of the very largest oil companies in america have paid absolutely nothing in federal income taxes. in fact, some actually got a refund, a rebate from the irs, so that is my plea. my plea is that yes, the need for deficit reduction is real, urgent, let's go forward. let's go forward in a way that's fair and responsible, and not simply on the backs of the most vulnerable people in this country. with that, mr. president, i would yield the floor and note the absence of a quorum. >> the clerk will call the role. >> more than 100 years ago, gary's grandfather left on a steam boat bound for america.

presidential con >> a look at social security in just a moment. first, an update. the associated press reports that a person with direct knowledge of the decision told the ap that u.s. representative senator giffords will attend. the family and doctors have not yet publicized the decision. a news conference was scheduled for friday in houston. her husband, mark kelly, is leading the space shuttle's next mission. now to social security security. the congressional budget office estimates that the reserve, the

social security reserve will run out of funds by 2037 if nothing is done to address the problem. today, the short fall was explained and what can be done. spoke to the economics club in washington, and this is an hour and 10 minutes. [inaudible conversations] >> it's searching. there we go. okay. very good. well, objective was to come talk and thank you very much for the invitation to come and talk to you all today and share about what we know and think we know and to have the opportunity to learn from you more of what we should know, and that's really my objective here today to learn as much as to tell you what we think we know. what we think we know quite a bit about is social security, the way social security is going

to be playing out in the future, what forces are driving it, that there is short fall coming, and gist go to the first slide. what solvency is and what the stainability of the social security system is one. one topic of some interest for awhile now is the con accept of do -- concept of do trust funds matter? it's a trust fund based program. there are other trust fund programs, the hospital insurance programs, medicare is a fully trust fund based program similar to the social security program. one thing to talk about today and looking for your feed back on is why are there short falls in the future for social security? something that we're not sure everybody really understands as fully would be desirable, so hopefully we can shed light on that. second topic is the budget issue. we -- you all have heard all of

the discussion about social security in the budget, medicare in the budget, what is the interplay, the implications about the trust fund programs, vis-a-vis the budget. many people said many things about this. i know there's people from the administration, paul ryan is now chair of the budget commission for the house of representatives, have stated, in fact, social security is not part of the budget issue, and we'll have a few slides that will address a little bit what the thinking is on that, and again, looking forward to your thoughts on this. first of all, going to the thing that i know best which is the solvency of social security, and working at social security, it does have trust funds, it is charged by law. we do have a board of trustees, secretaries of treasury, labor, health and human services, the commissioner of social security, two public trustees now, former

economic commission of the white house back in the bush administration, and so we are now fully up with six trustees on staff, and their charge at the board of trustees is really to look over these trust funds and their operations and monitor them. it's not to come up with ways the law should change in the future, but just to monitor the situations. part of the trustees is to then develop what the actuaries about at cms, both medicare and medicaid services and social security where i am to come up with a projection to present their annual report to the congress on the actuary status of these programs. that's really the basis of most of the work we do is assessing what the actual state and status of the programs is, and there's work on the sides occasionally when members of congress have ideas to change the program and

what the implications of the changes would be. this picture in front of you tells really what the picture is. solvency really is at in appointment in time the trust funds and the position of having enough money to pay all the benefits scheduled to be paid at that point. if there's enough money at that point to pay the benefits in full, then the trust fund is solvent. we tend to look at the future, are we sol vent now? the answer is yes, and for how long will we will solvent under current law? that's the critical thing. under current law, what's going to happen in the future, and you see the picture here. the black lines show you for the social security two trust funds, old agents with insurance, disability insurance, separate funds, we look at them together because when one runs into trouble, oftentimes there's a lot of changes to have to

reallocate the tax rate to make them more similar. the funds are dominated by the old aging survive's insurance, trust fund, something like 85%, but you can see the projected exhaustion dates for disability insurance combined fund is 2037, a number you probably heard before. that's when we project if nothing is done by the congress and leave the law exactly as it is, that's the duration we have until the trust funds will use up the reserves. at that point, there's not enough money coming in to fully pay the benefits in realtime. now, we break it out into two separate trust funds. we project that that will last out until 2040 as opposed to 2037, a little longer. with current financing and current expectations, it's to be

composed in -- exhausted in 2018. will that happen? well, we'll get more into that. you'll notice on the bottom part of the graph, there's a limit point here in 1994 where we reached the point where the trust fund was moving down and reaching exhaustion, and the trust fund said let's reallocate the 12.4% tax rate. there's an allocation of how much goes to each fund. they simply just changed the allocation of the 12.4 to put more of it in the di fund, and it brought it back up, more financed on an equal basis. because it's easy to do that and history tells us it has been, that's why we look at the trust funds on a combined basis. this is a picture of what solvency looks like as its defined based on the trust fund being able to pay benefits through what period of time

under current law, and i should mention the reason we always do this under current law and some people might say, realm, aren't the low -- well, aren't the laws going to change? we certainly expect they will. there's no question about that, but our job is to lay out what are the expectations if the law does not change? that tells policymakers when it looks like we need changes by and gives a sense of what kind of changes and how much change is necessary to avoid having this happen under current law. a second picture speaks more to the cash flow concept. again, remember, solvency is about the trust funds having enough money one way or another. it's useful to look at the cash flow of the system. it's defined by looking at the noninterest income, largely taxes or whatever else coming to the trust fund other than interest. comparing that to the cost of the program, the cost of all the scheduled benefits plus a little less than 1% of the amount that

is for administrative expenses. when we compare the income level, and on this particular graph, we have everything expressed in terms of percentage on the payroll, our tax base. it's not a surprise that the income level is flat line because we have a 12.4% tax rate so the taxes on earnings is a flat 12.4% of our taxable payroll. it does grow a little bit. it's not easily perceptible here. it grows a little bit over time because there's another component which is revenue of tax security benefits. we split that, a part goes to the medicare hospital insurance fund, but that tends to be growing over time as a percentage of payroll and that's causing the red line to grow ever so slightly into the future. the real story is the blue line. the blue line on this you can see that we are projecting for about the next three or four or

five years to be very, very close to have noninterest income be at about the same level as the cost of the system. they are going to be very similar, and that's not a problem, plus or minus is few billion dollars isn't a big deal. remember, going back to the slide before, the trust funds, the level of the funds, you are probably familiar with social security basis is about $2.6 trillion. that's a very large reserve, and that is why when you see on the graph from the blue curve starting to go up well above the red curve, we show that the cost of the system is going up, and, in fact, the system will still be able to pay those benefits because the reserves will be available to augment the taxes that will be coming in for a period of time. there will be a time after which those trust fund reserves will be used up, and the remaining taxes will still be coming in,

of course, but we will no longer have reserves to augment the taxes. we predict that will be in 2037. if this were to happen, if this plays out, and we use up the trust fund and have no change in law and all the projections come true, then we will suddenly during the year 2830 we've -- 2037 reach a point where we cannot augment the taxes. the trust funds are only allowed to pay out what's in the trust fund. there is no borrowing authority. it's not like the rest of the government. they really are very, very sogmented. they are very separate from the operations of the rest of the government. if we reach this scenario, trust funds run out, we project in the year 2037, we will have 78 cents coming in for every dollar of benefits. we can want full out benefits in

realtime. throughout most of the 75 year period, the relationship is stable. it's about 75 cents coming in for every dollar of benefits. you can see that the little dashed line is the cost of paying scheduled benefits which, of course, after trust fund exhaustion is higher than the amount of income we have coming in once we've exhausted the trust funds. that's why we say the reality of the trust funds is if they were to exhaust and there's tax revenue coming in after that point less than the benefits, that we would not be able to pay them out. how that plays out is not determined because we have never gotten there. i will get to that in an upcoming slide. when we talked about solvency of the program, we talked about the cash flows that are contributing towards possibly using up the reserves we have and having the trust funds exhausted. another very, very big topic much discussed is sustainability

of social security and really lots of programs, everything we worry about the stainability. social security, medicare, other programs, we are concerned, and we want to pay attention to stainability, and the question really is what do we mean when we say stainability? there's two definitions that have really evolved on this. the first one is just related to the fact of under current law, is the scheduled amount of revenue based on scheduled taxes coming in going to be sufficient to pay for the scheduled benefits. the answer to that is no. in that sense, stainability is not achieved if by stainability you mean under current law will there be enough rev new coming in with no changes to have the benefits. currently benefits are not sustainable. there is another concept of stainability which is sort of a

more fundamental concept. we -- ourceps on that is there's 435 people up the road here who will decide the direction of which the program should go. if we look at the chart similar to the one before, it shows us a percentage of growth domestic product, what the cost of social security is and what the income is 6789 you can see the income is a relatively flat line, the scheduled tax revenue, but the cost based on scheduled benefits is a different story. it's been actually operating for many years in the past where it was less than the amount of revenue coming in which is why the trust funds built up. we've reached a point where there's a point that there's parity between 2008 and 2030, we're seeing the level shift in the cost of social security. it's making a big move up, a very substantial move up towards the higher level of cost that's

going up above the level of tax revenue. now, you know, beauty is always in the eye of the beholder, and the question is does this look as though the system is sustainable or not? some have suggested that while it looks as though because these curves are not diverging from each other that perhaps what can be done is just to make some adjustment in the level of cost to bring it down or some adjustment in the level of tax revenue and bring it up and the system in its current structure with such adjustments certainly can begin to be sustainable. others say that a more fundamental change to the nature of the program really would be desirable or might be in order, and that's why we're so glad that we're actuaries and just run the numbers and leave the decisions to others. this gives you a picture of to have your views about what you think about the stainability of the system in the future.

there's clearly a self shift from the -- level shift from the cost of social security being 38% the cost of gdp to over the next 20-25 years it's going up to around 6% of gdp. it will be relatively stable after that under our projections. so if -- another question that arised is do the trust funds matter? what is the significance of the trust funds? well, if the assets exhaust from the year 2037, by law, the commissioner of social security at that time will be constrained to have only about three-fourths as much money available to be necessary to continue the scheduled benefits, things would have to be done, and the law is not specific about what would happen. then you might ask the logical question. well, i'll ask it. has this ever happened? the good news is no, and the reason is because obviously

congress and the executive branch has always understood that this would not be a good thing to have social security become exhausted and have a sudden drop in benefit levels for all beneficiaries, and as a result, we can see approaching such times in the past, and it happened in 1997 we have amendments to social security that make a big difference. in this graph, you can see what happened to the trust fund, and here we express the the level of the trust fund in line with the gdp. they are there to augment taxes when we need them. well, you can see back of the trust fund reserves had been, what? about 4.5% of gdp back in the 1950s, and they gradually came down until the 1973 amendment and there's 4% of the gdp. amendments modified the formula

and made it grow faster than it had been growing before. that ended up with increases in the tax rates, and that caused the trust funds to start diminishing. by 1997, it was realized fully and sufficiently that this trend was not going ton sustainable, and there had to be changes. the 1977 amendment made huge changes. the problem faced was on the order of three to four times as large as long range problem we have now. in the 1977 amendments fixed about three-fourths of that short fall, not all of it, but three-fourths of it at that time. that left a little more work to do. six years later, in 1983, we had further amendments increasing the retirement age and many other revisions that took care of the remaining gap that was left in the 75 year period in

the 77 amendments that highered taxes a little bit and other compromises. the trust fund levels turned around dramatically, and nay have been growing very, very sustainable, and that's why we are now at $2.6 trillion in the trust fund assets. is this the end of the story? well, no, we have our projection. our projection under current law in policy is that, in fact, we have peaked and that the trust funds will now start diminishing over time, and we'll in a minute get to sort of the why, which for me is the most fun part of this. the projections are that the trust fund assettings will start going down in the not too distant future, and then drop rapidly towards the exhaustion

in 2037 and they are period in which the debt that the treasury owes to the trust funds which are the trust fund assets will be diminished and during that period we assume that will be replaced by debt to the public, so it will be sort of -- >> [inaudible] favored demographics? what explained this rise? >> it was favorable demographics during the period and the fact that the tax rates had been raised up to a level. basically what happened in the 1983 amendments was that changes were made so as to look at the 75 year period as a whole to make sure things would be okay, and there was not -- at the time we did not have the computers we have now. we were not able to turn out

estimates on a year by year basis on very short order which we can now do overnight. at the time when we were doing estimates, there was a solution to get us fully financed over the 75 year period, but the time ing of the costs versus revenue were not as well matched as we would like, and this really speaks -- this is a great opportunity to mention the sustainability aspect of the since the mid 1990s, we incorporated a new concept into the report. i'm glad you raised this point. it's to not just look over 75 years because this is not a pretty picture. we don't want to see trust fund assets dropping like this in the end. the new regimen, and i'm happy to report to you that all the legislative proposals we dealt with for the last 16 years now have taken this seriously and to heart to not only keep this

trust fund ratio above zero over the next 75 years, but to have a level or slightly rising at the end of the 75 year period. if that's achieved, then the plan achieved sustainable solvency. clearly, the 1983 amendments didn't. it had the extra revenue brought in, front loaded in large part for demographics. great leading question. this is what we're facing. the money will drop. if this were to happen and hit 2037, run out of revenue, benefits are not payable, we can only pay 75%, and that's the reality if nothing else is done, but something will be done. we know there will be more amendments. >> back to page eight just briefly when that grouf is -- graph is downward sloping, are you drawing social security is

drawing money from the trust fund? >> right. money is always drawn from the trust fund because revenues come in. >> when there's money going in -- >> there's a net buildup in the funds. because this is belltive to -- relative to gdp, if we had no cash flow in our out of the trust funds, it would be relatively flat compared to gdp. there really is cash flow activity going on in the trust funds on a net basis. now, let me get to what i think is a significant and important thing to focus on and to understand. you see in the social security has in the past and it was corrected and we're still facing in the future short falls going on, and you saw the level shift on the cost is happening on a fairly sudden basis. you might ask why is in

happening? well, reason it's happening is because we're an aging population, but does that mean people are living longer? well, first of all, here's a picture of what our aging population looks like in the future. these are the projections for the trustees, and you can see in the past focusing on the yellow band in the top, 65 and older, a big representation of the beneficiaries we have, that's growing a little bit as a share of the population, but there's a sudden shift that is growing substantially between 2010 and 2035. there's a big change in the share of 65. the share that is 20-64 is staying the same, but the key things ratio of those over 65 and who are working age is changing a lot. we might ask, why is that? well, it is true, the baby boomers born in 1946 to 1965 are

crossing the threshold from working age to retirement age. they will be shifting to retirement age over that 20 year period, and they are contributing towards having a shift for more 65 and older and less workers, but that's not a permanent shift. it's just a bump of boomers, and then we went back to the way the population used to be. there's something much, much more going on other than the fact the baby boomers are a relatively large in the population. another thing looked at beyond the baby boomers is life expectancies. it is rising. there's the male and female line from birth. we are expecting these to continue to rise and the social security benefits, life expectancy after 65 is rising

since 1980, but we are projecting that male and female life expectancy will continue to rise in the future, and this puts a tremendous amount of pressure on social security, but the big factor over the next 20 years is the change in birthrates. change in birthrates remember, we used to have on the order of three kids born per women. we are now at two kids per woman, and that's our assumption that we're going to continue of two children per woman in the future. immigration has made significant impact on softening the impact of this big drop in birthrates. look at the total fertility rate defined as the sum total of the birthrates of women from ages 14-49, it's an age adjusted concept. look at the birthrates of those

ages, add them up, that's a rough estimate of a woman on average age of 14-49, or a million women in that board, the average fertility rate tells you how many children you can expect to be born to that group of individuals, and the little dashed line is the actual recorded fertility rate that happened historically. going back to 1875, you can see it's been dropping generally. we had the sort of dip in the 20s and the depression and then it pushed back up, post world war ii, and a let shift down after that, but we also created another line which is the solid line which is a little modification in the fertility rate that looks at just not the number of children born, but the number of children born in a year expected to survive to age 10. this from the theory that when people have children it's not just about having babies, but a

desire perhaps to produce adult offspring down the line. when you make that adjustment, the curve is different. it looks like the number was stable but for the dip in the roaring 20s and the depression and the bump up in the post world war ii baby boom. it's been somewhere in the upper two to three children per woman stably over long periods of time until 1965 which is the end of the baby boom generation, and the number dropped down. for awhile, people were taken aback for the fertility rate dropped to two. this is the transitional shift. women decided to have fewer babies, but having less children in the twenties and more in their thirties. >> we need to ban birth control? >> well, okay, so we've got the

first policy option put on the table here. very good. [laughter] so you can see what has happened here is we shift from on average roughly three children per woman to two. you see this happened precipitously to what are the implications of that? here's another view by the way, because i promised to talk about immigration. there's two ways how we bring people into the population. one is they are born and encourage others to come across the borders. we do have upwards of a million people entering our country more than leave our country in total every year. we have 4 million births in our country every year and almost a million net immigration coming in so clearly the immigration is a key factor in augmenting our births. no all countries have that net immigration. we'll continue to have positive immigration in the future. you can see it's not been an extremely long standing

phenomena. only since 1980 has there been substantial levels of immigration. we expect the levels of net immigration will continue in the future and basically if we add them into the births and say what is sort of an adjustment of fertility rate treating the people in the country as though they were births -- >> legal immigration only? >> both. this is all people in the country, legal and other than legal. a great point because the key thing in our long term projections by the way, for the people entering the country whether it's legal or undocumented basis, what gives the most impact on our trust fund solvency and our program financing down the road is not just that they come in. if we have people coming in in the year 2011 and paying into the system and then getting benefits, that turns into a wash during the period. what counts is that they have children when they come here. we have more births as a result

of the net immigration of the country and those children have children themselves. it's the additions to the populations and the multiplication of workers coming in during the period having a positive impact on the trust fund financing. >> tighter border control and what that would mean for the social security fund? there was a reduction in the social security systems -- >> no, no -- >> a reduction in illegal immigration, my sense is you don't get much much a bang out of immigration as you would if the borders were still pretty lose. >> that's true. it's available if somebody is interested, but we've done interests for ted kennedy and charles grassley and comprehensive immigration reform plans back several years ago, and we do do estimates for implications on social security financing will be the basis of

various kinds of legislation that would impact on immigration. it does affect our projections of the future. >> look at european's and japan's statistics. they are lower. if any, these are optimistic figures. >> right. japan, as you know, has a birthrate of 1.25. their population in 2005 has been declining even those people are living so much longer. it is declines because the birthrate is low and they have essentially no net immigration. we are still having at least essential replacement birthrates and having net immigration, so good point. our problem is significant, but it's actually worse elsewhere. if that's any solace, that's good news. look at the birthrate of 2.0, add in the net immigration, it

makes it 2.3. what that means is while the birthrate dropped from about 3 down to 2, with the the help of immigration, it's at 2.3. it's not quite as bad as just looking at birthrates, but still significant. the implications of this on social security and beyond social security clearly, we can look at what has happened to the relationship between the number of workers and the number of beneficiaries. this is very similar to a pure demographic ratio that's oftentimes looked at which is the age of dependence sigh ratio, folks over 65 divides that by the number of working people. this has the same shape after 1975, and i put a line here prior to 1975 because these statistics for social security before 1975 are really not very meaningful because when the program first started around 1940, essentially all workers were paying in taxes, but in

1940 when monthly benefits were first paid, you have to work the first two of the three years. we have very few beneficiaries at the on set of the system. it took awhile until 1975 for the system as a whole including the disability program that came in in 1957 to mature and get the stability, and this is what maturity looks like. from 1975 until 2008 or 2009, this ratio, the number of workers divided by the number of ben rich ri -- beneficiaries was right around 2.3 plus or my nos a -- minus. it was demographics and labor force and others during that period. the combination made the ratio constant during that period. however, over the next 20 years, things change. the level shift which now is

familiar, the timing and magnitude of it, there's a big shift in workers to beneficiaries. it drops from 2.3 workers beneficiary which was stable from 1975 to 2008 and it will drop down to about 2 workers per beneficiary as we move out to about 2035 and then it remains stable thereafter, and it's not a stretch, of obviously, to understand this is this shift, this timing, this magnitude is because of the shift in the birthrates. here's a little example, we'll go flu this in -- through this in detail because we talked about the shift from three to two children and the impact on that in terms of the cost of the system. you can break this down into numbers that do add up which is comforting to us and other economists too. if you look at just by way of taking an example, the average

beneficiary receives a $1,000 a month. if we were operating in a world where there's 3.3 workers for every beneficiary, that's $300 each on average they put on the table. high earners more, but on the average, $300 each to pay the $1,000 to individuals. in fact, over the period of 1990 to 2008, the workers were paying more than $300 each because we were building up the trust funds, the taxes were coming in more than needed to pay the current benefits. actually, in this stylize the example is more like we had something like $341 of taxes coming in for each of these 3.3 workers which of course produced more than $1,000. fast forward to a world with only two workers for every beneficiary. if these workers continue to pay the same $341 that they paid in

the past essentially equivalent to keeping the 12.4% tax rate, then the average retiree gets $682 a month, a 32% drop in benefits. well, this doesn't add up with our projection that under current law we will have about a 25% reduction in the level of benefits that are afforded with current taxes. what's the difference between the 25 and 32? we isolated the three items that explain the difference. one is between now and 2022, there's another change in the normal retirement age that lowers benefits by 7%. that explains a portion of the difference of 22 and the 35. another factor is that the revenue from taxation of benefits under social security is actually rising relative to payroll and gdp, and the reason for that is because the 25 and 32,000 thresholds are not

indexed. an increasing number of beneficiaries are subject to taxes in their benefits and that gets transferred to the trust fund. that's a slight increase. the third point, more subtle, is if you compare the average benefit for people receiving social security benefits to the average wage or earnings in the economy, that number even though we have a wage indexed benefit system, the benefits of wage indexed up to the point where you become eligible for benefits which for retirement a at age 62. across generations, the averages go up with the wedge wage. they keep in sync. however, after 62, the benefits go up with the cost of living, we estimate that's 1.2% per year slower than the average wage growth. well, if our distribution of our beneficiaries by how long they receive benefits stayed the same over time, say 10 years, that would mean that they would all

have the same number of cost of living adjustments and would have fallen behind, in effect the standard of living because every year there's a cost of living adjustment, you're falling behind the workers of 11.2%. over time as people are living longer, our average beneficiary will, in fact, have been on the rolls for more time and have more coast of living adjustment and fall more behind the general standard of living of workers which, of course, the place we derive our tax revenue from. the longevity lowers the average benefit level a little bit relative to the average wage level, and those three factors explain the fact that we have only a 25% short fall instead of a 32% short fall. now, with this, let me jump to sort of the second part of our, and i don't know how we are doing on time here, but have

just a few slides on another topic that, of course, is of a lot of interest and interest of us. that is the budget. how would these interphrase? you have heard a number of people from the administration, capitol hill and others says social security is part of the budget, budget negotiations, and we can look at this from a technical point of view and make observations in talking about this. first of all, social security, remember, it is not just mandatory spending. in addition, it is, in fact a trust fund program. they are trust fund programs operating under the basis of dedicated revenues coming in. as a result, the trust fund assets developed are current $2.6 trillion, those assets, in fact, are assets that have been

in effect longer than the general fund of the treasury, and they represent debt. they are a lability in the treasury just as publicly held debt if you have double e bonds or treasury notes, i bonds, kips, they are publicly held debt, they are marketedble, but they are money that the general fund of the treasury borrowed from another entity. 23 you look at two of -- if you look at the two together the trust funds and the publicly held debt create the total debt. the question is what is significance of this? it is accounted for in the budget, on budget and off budget, and so there is the opportunity at least to look at these as separate entities. the budget focus one might say should be at least on this basis that the on budget should be the focus for people really worrying about what's happening in the

budget because social security is a separate definable entity operating on a trust fund basis, and one could say the total debt which is the general fund owes to the public and the trust funds is something that might be of issue. publicly held debt is looked at most generally, but total debt is another concept ben they should be on the table to be considered. just to give you a little picture of the effect of social security historically and in the future. on budget balances, so if we say there's a trust fund perspective that says the trust funds are about the solvency of social security, that's one picture, and the rest of the government is on budget. the impact of social security is a red line. it's nothing. it doesn't really matter because if social security spends or costs built up trust funds or whatever, that doesn't effect

the on budget actions except possibly for one thing. you can see interest owed by the general fund or the treasury to the trust funds is, in fact, a cost to the on budget accounts. however, consider all of the assets that the social security has amassed over the years which is the basis for the interest that the general fund owes, social security, and social security had not amassed those assets and all other spending was as it has been, then that borrowing would have not been to the trust fund, so it would have borrowed from the public, and treasury has to pay interest to the public, and because the trust funds amassed these assets which are liabilities to the treasury, the treasury pays the trust funds, and if they had not built it up, they would pay the public, and so really the exist enls of social security and the trust funds don't create a net effect on the on the budget flows. now, look at it from a unified budget point of view, and this

is the world of suggesting, well, really, let's not worry about the trust funds, but the flows year to year and not pay attention to the trust funds per se and look at the flows. if you look at the flees then, the effect is really just its own cash flows over time, and one the key things on this as you can see where it went up and down in the past and it was very post world war ii sieve cash -- positive cash flows up approaching current, and now it's going to be dropping down because the big shift in the demographics, and we will be spending down the trust funds which is a dpraw on the unified -- draw on the unified budget if youing the for it that way. the draw on the budget stops once the trust funds exhaust because once a trust funds exhaust, there's no longer to be tapped into other than the current taxes so there would be no impact on the unified budget, even the unified budget flows would not be impacted under law

past the point of trust fund exhaustion. a little example here of how the on budget works. imagine living in a world where there's excess on budget spending, and that would require when there's access on budget spending more than brought in in revenue, there has to be borrowing from the public or the trust funds. . .

which we are going to be facing in the future under the current law which the flowage rinse the other way around and becomes negative. that is a period we will be pushing down love love that treasury goes to the trust funds but at the same time by the same amount pushing up the amount of debt owed to the public. so from that point of view it is a swap and the question is for you all to ponder is to the markets understand, do they and should they care? certainly they are pushed out there every year and people can see what's going to be happening in the buildup of social security trust funds and the spend down the markets understand this one would presume they are good that discounting future events especially predictable and so if the understand this one would think they would see this coming

and therefore when it happens it should not have a big impact but i guess time will tell. now another look just in terms of social security trust fund on the effect of the total federal debt this is a similar picture to the accounting on the annual budget bounces. the social secure the impact of the total, federal debt. and of course it doesn't have any. the social security builds up a bunch of reserves that much less the treasury has to borrow from the public so it balances out. the actions on total debt the federal government goes to the public and the world is really no. okay to stop war in total? okay. we of two more slides but the key is if you look at it from the point of view of the total

debt and believe that the total debt matters and the financial markets care about the totality of the debt of the treasury did social security sice trust funds are not. if you believe publicly held debt is in fact the issue than it does have a big impact i drew the line on here which shows under the budget scoring convention by the way the budget scoring convention assumes first of all it considers publicly held debt. it assumes something interesting that the trust fund programs like social security will continue to play out benefits even if it does not allow it. so when the trust fund exhaust it does not allow payment of the benefits of the level that is scheduled and moreover whenever we've reached that point the law has always been changed and congress doesn't really respond and they changed it to putting more revenue or to act on the benefits or a combination of the two. so the concept of actually doing budget scoring on the basis of

having this really quite enormous rise as a percentage of gdp and the amount of publicly held debt on the perception in much of the - line would be going out social security would continue to spend money that it's not allowed to spend of the current law is interesting so i would point that out when you're interpreting draft that you see about the rising publicly held debt and long-term future that does presume social security and medicare continue paying benefits long after the trust funds are exhausted and not allowed to pay those benefits. should we consider publicly held debt? that's something for people to consider. as i mentioned the financial markets understand the concept and pay attention to it. my guess is people who work in the markets are pretty savvy. they know a lot and pay attention to everything. the reality is total federal debt really does matter and social security assets and cash

flows are not budget issues from that point of view and that is why you have heard paul ryan and other people say social security is not really part of the budget issue. how this will play out in all the discussions is hard to say going forward. what do we do? this is coming back away from the budget perspective what we do about social security, and not that we've talked about the fact that it's the demographics, the shift in the teaching of the population, not just social security affected. medicare is affected if you have a nice big house in the time there were people out there wanting to buy those houses and the bid the price and in 20 years you want to sell it there aren't so many working age people trying to sell their houses every asset will be affected by the shifting of the demographics. so what are we going to do in general going into the future? we can encourage people to work longer. we are and will be doing that.

we can increase the retirement age that lures the benefit level one a monthly basis and lifetime basis and that certainly is a big help. we can reduce monthly retirement benefit levels, reduced the basic benefit level. we have lots of proposals. we can increase tax rates not only the 12.4 to 106,000 but we can increase the tax for the earnings above 106,800 where they are now at zero for the payroll tax. we can extend that and have some or all of the tax at a higher level put the consideration further and change the law to do that and encourage both as someone suggested earlier so we have lots of different possibilities here on how to sort of like this but remember what we are basically facing is with the current demographics which isn't optimistic or pessimistic. we agree with our trustees it's a down the middle of the road projection we are hoping we are

going to have either 25 -- either lower benefits by 25%, increase revenue by 33% or some combination of the two and that is well will be required. >> sorry for having taken up so much time. >> and 69-years-old, still working, finally starting to draw social security, and started to make a double check the accuracy of social security calculation to file an appeal. i got pretty close but not exactly. what i learned in doing that is what the effect of the so-called points are. i don't know how many people have and the social security calculations but when you realize when you do that is the amount of income redistribution within social security my

question is as you talk about changes down the road, one of the ways to deal with this is to effect shortchange high income people more than they are now being shortchanged by the social security but then the question comes at what point in time as social security lose the political support? the higher income people finally wake up and realize how badly they are getting shortchanged with the taxation of benefits. >> very good question and i hope everybody is familiar with this as we do the progressive benefit formula. i would first, 800 or so -- 800 was of average monthly earnings you get 90% and then for about the next something like roughly 4,000 you get about 52% and above that you get 15% return and we have proposals of the various types meanly 90% alone

to the effect some portion of the 32 and what effect the 90, the 15%. by the way, the 15% of payroll for the next 75 years only about .6% of the payroll, a very small portion, like 4%, .4% is attributable to the benefits that come in and that 15% of the range. so if you are concerned about having all of the savings on the backs of people in the 15% range that's not possible. we need 25% plus benefits if we don't do anything about revenue -- >> that is so broadens the negative political impact. >> however there is one thing you should be aware of. the institute and others have worked and we tried to do a little bit of work on it. it's true people with lower earnings benefit from the formula. however one thing we also recognize when we dealt to the estimates is people hiring tend to live longer, people with lower incomes live not so long

and there's been studies that suggest it in this up being awash in terms of lifetime benefits where you get a lower replacement rate, lower return if you are a higher, you live long were you and getting a lifetime basis points much and we've benefits relative to the tax issue paid in and the lower income people. i think the estimates indicate maybe it's not a complete wash there's probably still some shifting towards the earners but not nearly as much as you would think looking at the monthly benefit. >> in talking about the longer-term projections could you talk about what kind of assumptions were making about long-term economic growth and particularly part of that growth because that is an important -- give numbers about that growth assumptions you're assuming for economic and political. >> for the economic growth we are projecting a lot of that aggregate real gdp will be growing slower in the future for one principal reason.

if the growth rate in the number of workers is going to be slower, less than 1% of the future where it was 2.5 to 3% and the time the baby boomers were coming in increasingly having the labor force, if we go from 2.5% of the labor force down to 1% growth rate in the labour force that takes 1.5 per cent right off the top of aggregate gdp growth so we are projecting sloper gdp growth. now per capita gdp per worker which is labor productivity, we are predicting the future the labor productivity growth will be about 1.7% which is about the average it's been over the last century. and we discussed this a lot of our trustees there's lots of opinions. there was a period between what was at 1973 and 1995 and many will recall the economy was not doing so well and a lot of people thought it would be much lower below 1.5. there's the period between 1995 to 2005 with the new economy. a lot of people say it would be

over 2% and there are cycles. things come and go but we look at long-term averages to set the assumptions and we are about 1.7. the quick thing on that is because the benefit levels for people becoming eligible grow at the rate of average wage and of course the tax revenues grow with the average wage the actual solvency and cost of the system relative to the payroll is relatively insensitive to differences in the rate of growth of productivity and wages. it's very sensitive and the rate of growth of the population by birth rates and other demographic factors because we don't have anything that offsets those. >> i want to make sure i understand. sometimes when there's a surplus

the trust funds don't contribute anything to the debt. however, last year there were more benefits paid out than revenues taken in which means the treasury basically has to cash in the security that earned the trust fund. now, when the treasury does that it counts as a liability for the treasury? >> well, remember in the year 2010, our estimate is we had about $16 billion more in benefit payments than we had in tax revenue coming in during the year so that $16 billion of net that had to be drawn out of the trust fund our interest in the trust fund was well over $100 billion so the was a small amount. but yes, the trust funds did have to go and in effect redeem about 16 tolino was to the excess over the tax revenue in that year and if the rest of government were in fact running

surpluses, that would have been fine. if they were running surpluses than they would have been falling down the publicly held debt but they wouldn't have brought it down by as much. they were running deficits means the amount of extra publicly held debt they had to buy last year, over a trillion, was increased by about $16 billion. >> remember when the social secrete trust fund is reduced by 16 billion, the debt the treasury announced the social security is reduced by $16 billion. then if they have to border to get social security to 16 billion to pay those benefits they would have to borrow from the public and increase the debt by 16 billion they've reduced their debt to the social city trust funds by 16 billion at the total debt is a wash. >> the total demand for the treasury? >> that's right and how the markets understand that. >> everybody is concerned about the return and i understand the logic of that.

but if you think of the pension plan then you don't understand the way it's set up basically a paygo system. but logically these people do have a claim on the government. everybody who works and contributed to get the documentation when they get to be 65 or whatever. in my opinion that's not much different than having a bunch of zero-coupon bonds sitting out there. if they are zero-coupon bonds they should be on the balance sheet. so i'm saying i a understand your way of reporting and the framework for it is traditional and its conventional. i don't have a problem with it. but as a supplement to get at the point of what is sustainable which is what we are focused on why can't we talk about the part of it that this for us not a welfare payment, but what is it for us as a group. if you do that logically then you know your contributions have to match the volume of your liability to come through. a straightforward financial

calculation. so my question is do you do that as an alternative presentation so you can get at the point of calculating what the date of the liability is a the result of read the politicians will continue procrastination economics and believe we don't of a problem until 2037. they use that as an excuse so my question is do you do that and do they ever see it? >> absolutely it is in the trustees' report. we have estimated not only on the paygo system coming in you've described, you look at any point in time and say of all the money coming up to this state and that's gone up to this state and what we are doing today to we have enough to cover it on a paygo basis and that's really for today the taxes coming in versus the benefits we are paying out now. it's more like the normal fund plan.

whether it would be on the balance sheet >> we should have closed the group of a delegation. it answers the question if we were to close the system to people who are not under 15 and just what the system run out in the future for people now 15 and older you pay whatever taxes and with better benefits. that is in the trustees' report and shows with the unfunded obligation is on that basis. that's the number that you're looking for and that is a reasonable thing to look at, but of course of your operating system on the pay-as-you-go system where you look explicitly the congress decided not to fund of course we expect to have a large unfunded obligations by design.

today senator kansas a physicist first speech on the floor of the senate. he was formerly the congressman from the first district of kansas and served seven terms in the house of representatives. he spoke about financial issues including the fiscal year 2011 federal spending negotiations. this is 20 minutes. ltia >> i am humbled today to delivef my initial in the very first speech on the floor of theic united states senate and to discuss a topic of vital the importance to the country's future. the nation's it's a privilege to join the ita distinguished members of this chamber and to work alongside mg friend of nearly 40 years andatt colleague senator pat roberts. we met some ti to washington, d.c. as a summer intern the summer of 1934 in watergate for congressmane, pat

roberts was the chief of staff and had been my friend since. i am also humbled to follow inad the footsteps of governor sam brownback and the many who cames before him whose names are stand. i am mindful of their service fr and of senator bob dole who served for nearly three decades. in the seat. dole during the 36 years on capitoldo hill, the senator became known as a leader that workedances relentlessly to forge allianceso to pass significant legislations today he serves as a whole moded for those who dedicated theiri t lives to public service.call yew i think senator dole for his college a wishing well today but hi disting i think in more for hisnd to distinguished service to the. country and kansas.ople o if know the love and respect the people of his hometown of i russell has for him and i will work to honor his legacy. i grew up from bob dole's town s

in a smaller town, plaine philla a place where folks know their neighbors and look after them.nn much of what i know about people i learned early in my life by working at the local hardware store, the swimming pool, i learned that there is good in whatou every person and satisfaction it life comes from what we do forf. others rather than what you donh for yourself.joys i learned each family's joy andm sorrowin are increased andborsnd diminished when their shared with their neighbors and friendm and i learned what it means to others first just as my mom ando dad always have. i was fortunate to grow up withd loving parents who taught me tha value of hard work, theegrity. integrity. i'd in fact they once made me reture the 3 cents i found when i nghb' turned in a pop bottle from my neighbor's back porch. in the os my dad, a world war ii veteran o worked in the oil fields kansas and my mom grew up in thd

depression. they were my sunday school teachers and my boy scoutey wer leaders and the always encouraged me to do my best. t my parents worked hard, avoideda debt, paid their bills and billd wanted to make sure my sister t and i would have the chance tooe pursue our dreams.tilled i was also fortunate to havesi teachers to instill a love for learning and dues lawyer to explore the world beyond our and city limits. as a kid i enjoyed reading about politics and history and government and people like my fourth grade teacher helped mett to develop an interest in the eachtry and public service. t because of my teachers intereste in me i am part of the firstilyt generationo of our family tolle. attend and a graduate fromund wd college.ould have nothing tin my background would suggest i would have the senate. opportunity to serve as a member of the united states senate. o that sayspp something about our country and the opportunity thag we as americans have to dream big and pursue those dreams.

also this morning about my homem state and the special way of life we lead.f the pioneer spirit of those who sold our state 150 years ago ann paved the west lives on in kansas today. to we find a common sense solutions and try toe make a s differencen make a d our communities, our states and our nation. we also strive to provide ae for better future for the kids and grand kids so they can pursue their dreams and reach their goals. this is the reason i gotit's thn involved in public service and it's the reason i remain congrs involved today. , i m since coming to congress in 97i made it a priority to stick connected and so i return home t on the weekends and what drive at the grocery store attending church or filling the tank of ersati gas, the conversations i haveo d matter to me and in fact the in work i do here in washington.pri when i served on the house of in representatives i held annual eown hall meetings in each offoh the 69 counties in the district following the lead of my

predecessor, then congressman ti pat roberts. senat ior continued this is a senatorl begin traveling throughout all co on hundred five counties in our streets to hear directly froming kansans. and i'm committed to making sure their voices are heard in thelan nation's capital.ed last spring i watched the walk across for graduation stage ands was another defining moment for me. allenges a our conduntry is facing challens and if we fail to act our i believe all members of congress and in fact everyd american has the responsibility to be a good steward of what has been passed on to us. so at that moment that my graduation event i removed my to commitment to do my part to turn this country around. i am one of many voices to express this concern.the pium in 1985 president reagan tookecd the podium during the secondabo inaugural address and spoke about his greatest concerns, the

nation's deficit spending.f he told the american people 50 years of debt trending hadf brought the nation's to the timt of reckoning. po he said we come to a turning point, a moment for hard decisions. we must act now to protecte future generations from the government is all year to spend the citizens' money and attack the servitude when the billsi'me come due. y i am here today 26 years later to issue unfortunately the sameg morning.ur we are again facing the turning point in the country's history and we can no longer delay theft difficult decisions. when president ronald reagandena stood and spoke thonse words oub national debt was 1.8 trillion.r today that number has soared tor 14 trillion slowing our economit growth and prosperity of futuren generations who will have to pay for our irresponsibly. our government borrows 40 cents of every dollar it spends and sd shalf the national debt is held reigners many who do not share our interest.

debt is the responsibility of us several congress and presidentsl who have allowed us to live welf beyond our means for way toohavi long. members of both political parties ignore this growing thee fiscal crisis and lifted up to others in the future to deal with. in my travels in kansas i'm sinue to often asked how can washington continue to spend much, what will the country be like for our kids and grandkids? i join the kansans in foisting govement s these concerns. in just the last two years government spending has grown 25% and we have had a recordcit. trillion dollar budget deficit. this year the government will $. spend $3.7 trillion collect 2.2 trillion. that is a shortfall of 1.5 trillion. common sense.tern kansas common sense tells us s this pattern cannot continue. some say we need to raise taxes to get us out of this mess but the reality is we don't have a revenue problem, we have a spending problem.raised

experience shows money raised by washington, d.c. results in more spending in washington, d.c.. ao the debate about government isbt also about government spending a and seen as a philosophical and thademic or partisan issue, butu the truth is that out of controd borrowing and spending has veryl real consequences on the daily lives of americans. when we continue to fail tonfla balance the budget increasing, inflation, higher interestults rates, uncertainty in the biness economy which results in less business investment and fewerdis jobs.n this is not an academic is about discussion or partisan our on future of the nation, and wenore would not elect to ignore these. them. congress can and should do what kansas does, make decisions based on solid values and be held accountable for those decisions. a few atweeks ago the international monetary fund issued a report outlining howtus

serious our financial situation. has become. country in america was the only country that came under this scrutiny be behind its deficit goals and toe make matters worse standard and poor's downgraded the rating ouw of concern of the country's r ability to tackle their debt. an if we do not face the realitycoo and take serious steps now to come from this challenge, we will find ourselves in the similar position, the impact bee uguld be disastrous just as it't been in greece and portugal and ireland. unfortunately there really hasn't sunk in. president obama asks congress to increase the debt ceiling allowing the country to take onb even more debt.allow morpendin but it would be irresponsible to allow more spending without ae serious plan in place to reduceg the deficit. americans are looking for o leadership to help create jobs and get the economy back on itsa feet. of but lately they have heard a lot of partisan rhetoric and all the

seen as more government spending.chan it's time for the government tot change direction and to change o dramatically. restrain spending and put in job place measures that create jobse bye saying both no to more spending and yes to the jobs measures we will reduce theketpe uncertainty in the marketplace,i encourage business investment,my become more competitive in the rt global economy and most g importantly, create employment. the best way to get spendingudgt under control is to get a budger and stick to it and one of our basic responsibility is toget produce an annual budget and yet we are once again operatingasur under a temporary spending measures called a continuing the resolution because thess democratic leadership failed to congress has taken virtually no step to address the deficit spending. we've got to come together and e see that we do so and we mustreo pass a common sense budget that reduces our deficit this year, next year and well into the mono future.

last month president obama said2 his tone doesn't 12 budget message to congress.in instead of moving towards fiscai responsibility the proposale contains the same borrowing andd spending that proposes 8.7 trillion of new spending, 136 in the new taxes and double the national debt by the end of at n his four year term.en-year at no point during the ourovernm president's tenure budget reduction would the government spent less than it is taking ane rather than spend more we must close the gap between theumber f government takes in and spends.. for a number of ways to do that set a last month i introduced a reset act to recent 45 billion at constant stimulus funds and ay not the defic. deficit.easure i'v another common sense measure lifelong support it is the balae constitutional amendment to require the balanced budget.uird fortunately when members ofze tr congress are not required to simply borrow more over a long o period of time.nstitual amend the proposal of the amendmento would limit federal spending to of the gross domestic

product and require two-thirds e of the majority of congress toby raise the taxes. but forcing the congress to be disciplined to live with in the record deficits and back to fiscal responsibility. in addition to living by theaddr responsible budget we must also, address our long-term unfunded liabilities including social security, medicare and medicaide western interest in thing that r 56% of the entire budget. yea this percentage will only increase in the years ahead as workers are there to replace them. already social security pays more than it collects and its ie total debt will increase over bl half a trillion dollars in the e next ten years. state medicaid spending consumes a wil hell further burden the states t who are now required to pay for the vast medicaid expansion contained in the recent health rthermor care reform law.s furthermore medicare unfunded liabilities are $37 trillion.e t the staggering sum is nearly three times the currenteb national debt. i this challenge cannot be ignoret

any longer. and we must pursue change and refora but it will take the leadership of president obama and the willingness of both political tiersa parties. we are ready to have that conversation with the president and expect his leadership.hat sector so congress must create an environment where can entrepreneurship and businesss e can flourish.ri small businesses are theaner backbone of the american economt and generate 65% of the jobs over the last two decades and employee half of the private sector workers, smallion businesses, the engine of job creation and critical to the suc country's economic success. kanl business owners will say whatarl next, what next is washington going to do it puts me out ofeae business?ory a for toond long washingtonus increased the regulatory and taf burden on businesses at the govm expense of jobs. tax mountainses of government regulations and higher taxes ard undercutting any efforts to create jobs in the globalcturing competitiveness especially ofy.

manufacturing and agriculture energy. tir rather than hiring new workers fear spending their resources on complying within regulations anr increased taxes or worse those businesses are leaving ourple bk country. we need to be doing all we can e to put people back to work and grow the economy and that includes replacing the convoluted tax code andeaucrati eliminating bureaucratic intrusion to the free market ronment economy.ome mu maintaining a strong business o environment atpe home must openn new foreig goon markets for amec goods and agriculture commodities are not the world ie today's global economy we cannot afford to sit on the sidelines while other countries moveisk forward to read each day we risk losing more of the markets and e nations. across the tcountry thousands n americans depend upon exportsore for jobs and more than one-quarter of all manufacturing workers in kansas. o by increasing the nation's c exports we will create jobs and opportunities for all americansr without raising taxes orwhile o increasing the budget.mploym one of enthe nation'st unemployd rate hovers between nine to 10%y

it is simply inexcusable to not do what we know we can do thewi would create jobs in america.nso a common sense way to open more crkets is the past to the grumet of colombia and panama and south korea which has beenan stalled in congress and during the delay while the congress does this big move towards trady deals with canada and chile, the e.u., brazil and argentina to name a few of our competitors.se the tariff cost american farmers to lose 20% of total agricultural markets in colombia over theral last five years.ime it's time to pass these trade agreements and create more .srkets and therefore more jobsu for americans. for the u.s. to remainket, competitive in the market, a allows ample energy supplies ecich are both affordable and r reliable. rising gas prices in the middlee east demonstrated once again tha importance of having access tonc nsliable energy. a no single form of energy to provide the answer to meet thee energy needs we must develop the

traditional sources of oil and natural gas and coal and encourage renewable energybiofus sources like biofuel, solar, geothermal and hydropower. expand the use of the energy and encourage conservation. last week to repeal the healthfc care law and replace it with and common sense changes that reduce the cost and promote choice in the health care system such as increasing competition the insurance market getting states the flexibility to address the t health needs of the unique population enacting the medical liability reform and enabling small businesses to pull toget lower prices.acked these ideas have bipartisan support and are backed by the american people because we know they will work. p congress should be an ally of the people, not an adversary. congress has the responsibilitye to create an environment for free markets to succeed so with business can move forward with confidence and start againin wao in washington, d.c. it's easy tt forget what's most important ino the midst of all the talk of las

partisan politics, the nexteed a election or the latest poll. i'l when i need take a walk and will walk from this magnificent capital to thes lincoln memorial and between those two points i now pass the world war ii memorial. i passed the vietnam wall and ol my way back and will walk by the korean war memorial. our these memorials to the citizens help put everything in itsroper proper perspective. at our our freedoms are so importantk that our nation's sons and their lives to defend andthese protect them. these brave men and women didn't sacrifice for republicans or democrats. they gave their lives for the greater good of the country anda to ensure their children andencn grandchildren but also experience america's freedom ann liberty. we have before us an aside t opportunity, an opportunity toor set aside the game of politics and work together to confrontus. the enormous challenges before us.ur whether we have the courage to tackle the fiscal crisis nowf or ntll determine the course of thi

country's future into the next k generation as well and i stand s ready to work with all my colleagues in this chamber to do what it takes to get the economr back contract. americans are known for their enterprise spirit and strong results and our country willnd recover when we began to live within our means and create a pro-growth business and job environment reached last month we recognized the 100th anniversary of president ronaldr reagan's dearth. it is a fitting time for l americans to honor the memory oy a man whose leadership guided our the country through the of challenges. he believed in the greatness ofl america. he believed the principles of individual liberty,rise, ande be self-government and free limits enterprise. and he believed there are no and limits to growth and human their progress when men and women areh free to follow their dreams.e ft it is with the same optimism and hope for the future i stand hera today. i did not come to washington,bea d.c. for glory, i came because i e believe we have a responsibility

have been given and to pass to the next generation the life that we love and lead. loo we know what america can and should look like. when i took the oath of officeju about six weeks ago standing just a few feet in front of me,d i pledged to support and defendf the united states constitutionds and to fulfill the duties ofonte this office, so help me god. and and i will continue to seek his help and guidance in the days ae ahead, knowing that in him allas ewings are possible. m n as i begin my new with responsibilities, i remainaking committed to leading with common sense and making the tough decisions necessary today so that tomorrow and every day day grandchildren can leave inty america with freedom and liberty and then they will have the opportunity to dream big andces, pursue those dreams. if i'm successful, i will fulfii

my response abilities. if i'm successful i will have lm fulfilled myy responsibilities d a parent just like my mom and dad, and as an american whoan be believes our crountry is betteri and brighter days lie ahead. time.mr. mccoell: m >> the republican leaders congr recognized. >> to congratulate our new inspiring first speech to hisugt colleagues and suggest it seemso like we have a new senator fromm kansas in the tradition of bob dole and sam brownback and pat e roberts and i congratulate our new colleague on an inspirational first speech. to talk about the federal debt. he said that he and seven other republican senators sent a letter to the majority leader read reforming the intent to block any legislation not

pertaining to the national debt. his remarks or ten minutes.ublis to respect your urged democrats and republicansn alike to focuss on the single biggest domesticcr threat toy, the country, the single greatest challenge in thf eyes of every american i know,hs and that is to stop this runawai spending inca debt. mr. president, americans always run the country come certainlys louisianan all-around nice thing to understand that this is afut' graves threat to our economic future and it isn't just a vague threat to the generations to or three away from us, this is an t immediate threat because the path of spending and debt isr in completely unsustainable. we must come together in aust bipartisan way and act and solvg this real and pressing problem

before it's an immediate crisis. and mr. president i think we should clearly do that welleed f before any need for an increase in the debt limit arises well a before this congress reaches a crisis atmosphere over the need for the increase in the debt the limit. for all of these reasons, mr. president, i would joincolls together with many of myhe major colleagues. i said the majority leader, senator reid a letter today. first let me thank all of my my colleagues who join me on this letter. senator sessions, rubio, dement, paul, please and in san. simple the letter is simple and straightforward. it says that this is the that

greatest challenge we face and this is because of that we need to face it. it, we we neneed to be dated and talk about it and need to act and we need to start doing that now well before any significantebt decline like when the debt limit may have to be increased. so the letter says we are going to oppose moving to any bill that doesn't directly address o this crisis when we need to act let me read relevant portions oh the letter because i think itear goes right to the point. on yesterday the senate voted on two proposals to fund the fiscal government for the rest of the fiscal year. but this debate gave only a limited opportunity to discuss what americans know is the crucial issue of our time cutting government spending and dramatically reducing ouro m national debt.

additionally no member of the or senate was permitted to offerhe amendments under the structured process which in our opinion prevents a full open and robust debate. natio with our national debt plays to reach its $14.3 trillion limit in the very future, taxpayerswor expect the congress to workful together to reduce wasteful ande unnecessary spending and be morf vigilant about how we spend peol public funds. the american people want congress to deal with the toughn issues of cutting spending and t almost every mheember of thee senate has agreed we must address our fiscal situatione ay immediately. the while there are certainly many issues that warrant to the tthe consideration, we feel thend senate must not debate and consider bills at this time thay do not affirmatively cut ructur spending, directly address structural rbudget reforms, reduce government role in the economy so businesses can create

jobs or directly address this current financial crisis. the american people resoundingly rejected the way the senate wait until christmas eve as a mechanism to force a debate onan president obama's massive health care legislation.gislativsure proceeding to other legislative measure effectively runs awayiss from the central issues of spending and debt and repeats ps that process. we therefore are notifying you c of our intention to object to legislation that fails toa directly address this crisis in ou a meaningful way. our objections would be withhelr if the senate agrees to dedicate significant for tire to debate f this issue well in advance of rn theg federal government reaching hour statutorily mandated debt limit.ncerely sincerely, and again it isingedy signed by both myself and cente,

session, rubio, demint, paul, we and a in some to the majority leader.nt and again, mr. president, the statement is clear.we n this is a crisis. we need to act certainly before we reach the statutory debtng limit. so what are we waiting for?let's let's act now. let's not move to the other cats and dogs bills that may be certn positive legislation that can t certainly wait. let's move to the people's to business. let's move to the absolute top challenge we faced domesticallys as a country. let's come together and debate vote on and hopefully begin to ailve this problem ofst unsustainable spending and debt. now mr. president, to do that w, also need leadership, ideas, suggestions, and i believe we a have provided that on this side

welcome ideas, suggestions,, a huge proposals from all members. let me just list the more thantn two dozen pieces of legislationm that go directly to this issue. let me list some of them.4 senate bill 14 to establish then commission on congressional budgetary accountability and deral review of federal agencies. senate to bill 81, isaacson to for the senate official personnel and office expense accounts to be deposited into the treasury and actually reduce the federal debt.bill, which the senate bill mccain whichtra requires the omb to transmit the congress a message whichng a specified information requestins any precision the president proposes under the procedures ta instituted under that act. cut sent a bill 162 bi cementer paul

to cut $500 billion of federal y spending from fy 2011. the ful senate bill 163 by senator to meet the full state and credit act to prioritize principalnd ie interest pa dyments when and ifi the debt limit is reached.deral senate bill 178 by senator demint to reduce federal $2.5 spending by $2.5 trillion1. senate bill 245 bi cementer corker, the so-called act to c create a discretionary spending cap for congress. to senate bill 259, this is my bill to privatize social security l payments if and when the debt senate bill 360 by senator a poi inhofe to create a point of eader to exceed non-security discretionary limits and also to create spending limits for 202 fiscal year 2017 to 2021.

senate bill 389 by senator kirkr and i believe senator hatch hasr a very similar bill to establish the commission to review cost control. senate bill 391 by senator boren to rescind all on obligated obaa balances of president obama's stimulus bill. the joint resolution three by senator hatch, the balanced joit budget amendment and senate joint resolution four by senator shelby on the same topic andnate senate joint resolution by senator lee on the same topic. it's a long list but it's not exhaustive, mr. president.st rel i just read a partial list to make the point we are coming up with ideas, proposals, solutions. we encourage every senator of every party to come up with

ideas, proposals come solutionse and let's actually talk aboutace the greatest threat we face as a country. let's talk about it now. let's debate it now and exchange ideas and a positive atmospherea now before we reach any crisis atmosphere over the debt limit. respectfully urge thesena distinguished majority leader senator reid to heat our call to take up the call to arms to read the letter and react by creatint identified time on the floor well before we reach the to statutory debt limit to debate and pass solutions on thissident crucial topic. again, mr. president, i would think there is the date that this isn't the greatest that challenge we face of the gre country, atthis isn't the greatt economic threat we face.

so quite simply what are we need waiting for?ese ide we need time to bring forth these ideas and exchange them and debate them and act. w we neeled time to do this before the statutory debt limit is the reached. we need to do the people's business in a reasonable way ann in a sober atmosphere not in anr atmosphere of hysteria or flatse when the debtd limit in would b. reached in a matter of days. of with that mr. president, i would urge all of my colleagues to efr join us int, this effort to come to the floor with your ideas, do your proposals and let's do thes people's business. m i ask unanimous consent that a letter be made part of the record. >> without objection. >> i also ask unanimous consent republican solutions ande presid proposals be made part of ther:w

>> without objection. >> with that, mr. president, i yield the floor. >> today the white house hosted a summit on preventing bullying. on the senate floor senator al franken at first proposed legislation to stop bleeding ino the nation's schools. his remarks or ten minutes. i would like to tell you about a teenager i keep you know about him from our home state, minnesota. min yesterday should have been justin's 16th birthday. he was a kind young man, friendly and cheerful, buddingtr composer, but he was also the target of bullies at his high

school who target him because he was different because he was gay. i never had the opportunity toym beat justin. that. his family lost him to suicidepd last summer. you and i have been privileged to meet his mother, tammy. a few times. to she's incredible. she has been speaking out to protect other kids. o because unfortunately there's at lot of other t kids out there struggling to get through school as they suffer from bullying, harassment and discrimination at their public schools. nine out of ten lt bt students are harassed or bullied orharast taunted and school a dnd this

equalre education. they are likely to skip school academically and more likely to drop out before they graduate 'som high school. in some tragic cases like justin's, the harassment ofd elegy bt students can even lead to suicide. we have seen this and all too many cases all over the country much broader than t the justin.- gay and sexualsuic you if have e a suicide attempt. more than a third. that is horrifying beyond belief

to me. we are failing these kids. and that is why i along with 29 of my senate colleagues,, including the presiding officer have reintroduced the student crndiscrimination act today.ibis while federal civil rights law lease prohibit discrimination on the basis of race, color, sex,ot religion, disability and ex national origin, they do not explicitly covered sexual or gender identification. as a result, parents of lgbt students have a limited legal cd recourse when schools fail to protect their children from harassment and bullying.ng

you might be wondering why i mention the discrimination in in it's a simple.kids when a school acts to protect kids with disabilities from bleeding the looks the other wae when lgbt and kids are harassed by their peers that is discrimination. when the school staff members bullying ofnati lgbt youth thats discrimination. bully iden a principal excuses' agbt k bully who torments a lgbt kid,"s with "boys will be boys," this is discrimination, and it needs to stop. it needs to stop before more kids are hurt. the student nondiscrimination act would prohibitpublic schls

discrimination and harassment in public schools based on sexual. orientation and gender identity. it would give lgbt students similar protection against bullying and harassment as thoss that currently apply to students based on characteristics like race and gender.provide the legislation would also remee provide meaningful remedies fora discrimination in public schools based on sexual orientation or t gender identity model on title a mine protection against g discrimination and harassment 50 years of civil rights history shows similar laws that containc such remedies are often most effective in preventingst discrimination from occurring in the first place.ne like other civil rights laws, wd the one we introduced today

would prompt schools to avoidsts liability by taking pro-active steps to prevent discrimination and bullying of students protected by the bill. psed, i guarantee that when this bill was passed nearly every school o district in the country is goink to go to the lawyer and ask how do we come into compliance? i guarantee you the u.s. to permit of education will issue h regulations as it has under title nine. so the schools have guidance as to how to protect these kids. the goal isn't for any school tt kids ssfmerontm bullying and ist harassment. to the goal isn't for any student r to d come under the department s education scrutiny. to the goal is for schools to do all they can to ensure that these incidents never have been ine