Secretary CELEBREZZE. Yes; under the present law he can draw both. Senator ANDERSON. He can, therefore, get more money by being sick than by working. Secretary CELEBREZZE. Sometimes you get more money by being on public assistance than by working under State programs. Senator ANDERSON. I recognize that. I am just worrying whether you are going to make it more difficult. Secretary CELEBREZZE. Here again-the reason I say this needs thorough study-the committee has advised there are many factors that enter into it. Let's assume at the time you have total disability you were working at a low wage; whereas, previously you had worked at a higher wage. Let's assume that there will be a change in the level of wages; there will be increases, as there have been in the past. So all these factors have to be considered in coming to the basic conclusion. Now, as I said, there is nothing to prevent the States from taking social security into consideration in their workmen's compensation laws if they so desire. If offsetting benefits are the road we were going to travel, I would prefer it would be done in that manner rather than have workmen's compensation deducted from social security benefits where we would have a very complex situation of determining when to make the offsets under 50 different State laws. So, I think that the problem is of significant scope to really study it, and the House committee recognized that and asked us to submit a report by December of 1966, and the advisory committee which made its report just recently also suggested that we study this and we are in the process of studying it. Senator ANDERSON. In your statement you say you anticipate a very high percentage of the aged enrolling in the supplementary plan. What do you estimate the number to be now? Secretary CELEBREZZE. Our best estimate is somewhere between 80 and 90 percent. Senator ANDERSON. Which would give you a very fine volume and, therefore, permit you to handle it in a much more efficient fashion. I don't have any further questions. The CHAIRMAN. Senator Curtis? Senator CURTIS. Mr. Chairman, I will ask a few questions and then I will pass so that others may ask questions. Mr. Secretary, by what year will they reach the maximum tax, dollarwise, under this schedule? Secretary CELEBREZZE. 1987. Senator CURTIS. That is the maximum rate? Secretary CELEBREZZE. That is the maximum rate. Senator CURTIS. Yes. Now, you reach the maximum wage base by 1973, will you not? Secretary CELEBREZZE. We will reach the maximum wage base in 1971. It goes into effect in 1971. It is $6,600. Senator CURTIS. Now, I have made some calculations based on 1973. What will be the maximum tax levied on an employee in 1973 if he earns the full amount of covered wages? Secretary CELEBREZZE. Are you talking percentage? 47-140-65-pt. 1- 10 Secretary CELEBREZZE. Dollars. In 1973 the rate on the employee will be $353.10, dollarwise; that is, with a rate of 5.35 percent. Senator CURTIS. According to my calculations, if a young man enters the work force at age 21 next January 1, and these schedules remain the same and he works for 44 years until he is 65, he would pay in $15,469.90; is that correct? Secretary CELEBREZZE. Well, assuming your mathematics are right. Mr. MYERS. It sounds correct. Senator CURTIS. And if his payments were put in a savings account, drawing 4-percent interest compounded quarterly, he would have had an investment in social security of $40,653.54. Secretary CELEBREZZE. That is right; but you are starting off on the wrong assumption. Senator CURTIS. What is wrong with my assumption? Secretary CELEBREZZE. Because you are just taking the retirement benefits. You are not computing in there the benefits in the event of disability and so on. Senator CURTIS. No; I am talking about cost. Secretary CELEBREZZE. Are you talking about the cost factor? Secretary CELEBREZZE. Are you talking about the cost factor and not benefits received? Senator CURTIS. I am not talking about benefits. Secretary CELEBREZZE. Excuse me, I thought you were talking about benefits. Senator CURTIS. According to my calculations if his wife worked not for 44 years but 30 years, at the maximum coverage, she would pay in $10,295.50 if she began her work career as of next January. With her interest accumulations, it would amount at the time of her husband's retirement at 65 to $19,293.84. The two of them would have put into the fund, if you credit them with interest, by the time the husband is 65, $59,947.38. Secretary CELEBREZZE. That is about right. Senator CURTIS. Now, what was the maximum tax that an employer had to pay for employing somebody when the act was passed 30 years ago; $30, wasn't it? Mr. BALL. $30. Senator CURTIS. If a small businessman employed 10 people, his tax then would be $300 or 10 times $30; isn't that correct? Secretary CELEBREZZE. Right. Senator CURTIS. What will it cost a small businessman in employer's taxes to employ 10 people in 1973, if they earn the maximum? Secretary CELEBREZZE. Ten times $353.10; $3,531. Senator CURTIS. $3,531 is what I get. How much will a self-employed person have to pay in dollars in social security tax if he earns the maximum in 1973? Secretary CELEBREZZE. We are including in this the provisions of the present bill? Senator CURTIS. If this bill is enacted. Secretary CELEBREZZE. In 1974 he would pay $498.30. Senator CURTIS. I won't ask you to pass on my arithmetic because it might be wrong. But I calculate that if a farmer or a corner grocer or a lawyer would earn the maximum, beginning January 1 next year from 21 to 65, he would pay $21,832 in social security taxes. Were those amounts to be deposited in a savings account at 4-percent interest compounded quarterly it would have an accumulation by age 65 of $59,345. I have likewise estimated that if his wife worked as an employee not for 44 years but 30, taking the figure from the previous illustration-that the couple's investment in social security plus interest would amount to $78,638. Mr. BALL. It sounds reasonable. Senator CURTIS. I want to ask: How about an individual who works Secretary CELEBREZZE. I think your statements are true, except that the employer does take some of it off his income tax, so that while he pays the employer tax he gets something back, on the other hand, on his income tax. Senator CURTIS. That is correct. Secretary CELEBREZZE. Also, I think if you wanted to draw an analogy you ought to figure how much we pay for automobile insurance and fire insurance and accident insurance, and if we had taken that money and put it in a trust fund or in a bank we might have much more than what you said here. I see what you are driving at but I think you started off with the wrong philosophy. Senator CURTIS. I am not driving at anything, but just trying to figure out what it would cost, that is all. How about an individual who works after he is 65 years of age. By 1973, he would pay this $353 social security tax but if he availed himself of the benefits of the medical portion he would add $36 to that, wouldn't he? Secretary CELEBREZZE. Yes; $36. Senator CURTIS. So his payments under this bill, if he availed himself of the medical part for a man over 65, would be $389.10 for 1973. Secretary CELEBREZZE. That is right. Senator CURTIS. What is the average age of retirement? Secretary CELEBREZZE. Sixty-seven. Senator CURTIS. According to my calculation an individual over 65 who continued to earn in self-employment and availed himself of this $36 contribution and if he made the maximum amount by 1973 he would be paying in $534.30 a year. Secretary CELEBREZZE. That is a self-employed person? Senator CURTIS. Yes. Now, has there ever been a schedule of tax rates set forth for a period of years in the future that has gone into effect without change? Secretary CELEBREZZE. Under this program? Senator CURTIS. No, I mean in past years. Has the Congress ever let a schedule of proposed tax rates go into effect or hasn't it always been changed before it reached the end of the schedule? Mr. BALL. You mean the entire schedule, Senator? Senator CURTIS. The entire schedule. Mr. BALL. You are correct. The scheduled rates for some years have gone into effect. Senator CURTIS. Some years. Mr. BALL. But the entire schedule-we haven't reached the end of it-it has not gone into effect without change. Senator CURTIS. Yes. Under this bill when does your schedule level off and become fixed? Secretary CELEBREZZE. 1987. Senator CURTIS. If that schedule does become fixed and remains a permanent schedule it will be the first time it has happened in the history of the Social Security Act, isn't that right? Secretary CELEBREZZE. The whole schedule. Senator CURTIS. Now, these past revisions, have any of them been revisions downward? Mr. BALL. In the rate charged? For a particular year, but not overall Senator CURTIS. Not in what they would pay. Mr. BALL. The ultimate rate has always gone up, Senator. Senator CURTIS. That is right. Senator SMATHERS. You are talking about social security now exclusively? Senator CURTIS. Yes, social security exclusively. Here is another question and then I am going to yield the floor. I have quite a few questions. But I will wait until the others have finished. It wouldn't be possible, would it, to try this program for a period of 10 years to determine whether or not it is satisfactory? In other words, to put a termination date in here at the end of 10 years, would it? Secretary CELEBREZZE. In any bill passed there is an implied termination date in that the bill only lasts as long as Congress wants that to last. So at the end of 10 years, if Congress wants to change it, Congress can change it. They can terminate the whole thing tomorrow. Senator CURTIS. We couldn't pass a bill here that said the termination date of this is going to be 10 years from now, because the people 55 years old now wouldn't permit the Congress to pass a bill under which they would pay and have it terminate the day they are 65. Secretary CELEBREZZE. That is right. I agree with that statement. Senator CURTIS. Yes. Neither would the people 30 years of age or 40 years or any other age. So, because of the scheme of social security—it is here and I am not quarreling with it—we are legislating in perpetuity, are we not? Secretary CELEBREZZE. Practically, yes. Senator CURTIS. Just as it would be politically and every other way impossible to put a 10-year termination date, it would be impossible to put any other termination date in here. That is correct, isn't it? Secretary CELEBREZZE. I don't think you could get a termination date through the Congress if that is what you are driving at. Senator CURTIS. That is right. Secretary CELEBREZZE. But the program is subject to modification from time to time. Senator CURTIS. Subject to modification, yes. But whatever we do in this field, because you can't put a termination date on it, is binding upon future social security taxpayers, isn't it? Secretary CELEBREZZE. It certainly is binding on future social security taxpayers. Senator CURTIS. We by this act are determining what our society will pay in social benefits not only next year but 10 years from now or 50 years from now. We are determining what the load will be of social benefits for taxpayers that aren't even born yet. Isn't that correct? Secretary CELEBREZZE. Congress made that decision 30 years ago when they adopted the social security bill. Senator CURTIS. I am not quarreling with you. I just think it is a point worth considering here when we start in on a program to pay hospital and medical bills for people who may be a lot more able to pay their own bills than the rank and file of social security taxpayers. Secretary CELEBREZZE. That is true, but I think in the great debate in 1930, as I recall it, we went all through this. The Congress considered the same basic arguments that you are presenting today. It was said that social security was going to kill private pension plans, and I showed in my opening statement how the private plans in cooperation with social security now number 34,000. These were all factors considered. I think it is somewhat of a moot question at this date after 30 years. Senator CURTIS. I don't think so. We are starting a new program, and would you say that someone who has upward of $10,000 a year income in their retirement should have their hospital and medical bills paid at public expense? Secretary CELEBREZZE. It isn't at public expense. They have contributed to it. Senator CURTIS. Well, now, how many people are going to get benefits right away? Secretary CELEBREZZE. There will be about 19.1 million people that are eligible for it. Senator CURTIS. Yes. And many of them didn't contribute anything, did they? Secretary CELEBREZZE. 2 million will be covered under general revenue funds, but the others Senator CURTIS. You are starting out a new trust fund and no one has contributed, isn't that right? no. Secretary CELEBREZZE. No one has contributed to that trust fund, Senator CURTIS. Well, now Secretary CELEBREZZE. But they were part of the system and being part of the system they are entitled to share in the benefits, just as when there is a benefit increase, being part of the system, they are entitled to it. Senator CURTIS. I won't quarrel about a distinction between those who have been covered under social security and those who have not. My question is are you advocating that a retired person who has as much as $10,000 a year income, that this program pay his hospital and medical bills as set forth in the bill? Secretary CELEBREZZE. The basic principle, whether it is $10,000 or whether it is $20,000, and it is a small group of people over 65 years of age who have that much, is that we will not, we do not advocate, we do not subscribe to, any program which must meet a needs test. Senator CURTIS. How about an income test? |