Freedom is On the March

Thank you. And I’d like to thank everyone I serve in Wisconsin for the privilege to represent them in Congress. Those of us serving in Congress today have a great responsibility and a tremendous opportunity.

Friends, we have arrived at a defining moment for our nation where we must choose between two paths. One leads to a future where government exists to serve the individual, to protect life and liberty, and to foster the conditions that allow every American to strive and prosper and live up to his or her potential as a productive, creative human being. The other path leads to a society where an ever-expanding government saps the strength and resources of the individual through massive tax hikes and other misguided policies that put the government in charge of the citizens it was created to serve.

This is not the first time we’ve struggled over the proper role of government. Rather, it’s one of the final chapters in a saga that has played out over time. During the 20th century, our nation and the world itself saw a tug-of-war between the dueling ideologies of individualism and collectivism. On the world stage this brought violent clashes between communists who, at gunpoint, imposed their ideology (and with it, a desperate servitude), and free nations where individual rights and liberties still flourished.

But, even in these nations, a struggle was taking place between the collectivists and those who believe in the potential and promise of every individual. Socialism permeated the economic policies of many of our European allies, slowing growth and yielding stagnation. And in the United States over the last century, we saw the federal income tax enshrined in our Constitution – growing in size and scope in the years that followed – and watched the government take on more and more social planning. From FDR’s “New Deal” to Lyndon Johnson’s “Great Society” we’ve seen the left push Big Government as the predominant solution to our nation’s ills. While this was a response to real problems that needed to be addressed, the architects of these government programs and our modern tax system could not see that their creation would evolve into something very different than they imagined – into something that ultimately acts as a drain on American ingenuity.

Fortunately, the unhealthy expansion of government’s domain met with thoughtful resistance as its consequences came to light.

Among the most influential voices to promote individual liberty and limited government was a former Democrat – who became our 40th President. In his First Inaugural Address, Ronald Reagan made his aim very clear. He said, “Now, so there will be no misunderstanding, it is not my intention to do away with government. It is, rather, to make it work – work with us, not over us; to stand by our side, not ride on our back. Government can and must provide opportunity, not smother it; foster productivity, not stifle it.”

Today, we strive for the same purpose.
To illustrate the magnitude of our present situation and the consequences of our decisions, consider this: Medicare, Medicaid and Social Security, which now consume 44% of our federal budget, will consume 100% of today’s budget in the year 2035 after all of the baby boomers retire. That’s right. Because of demographics, these programs – where current workers support current retirees – will force the growth of government to unprecedented levels if they are not reformed.

Over the past 30 years, our government consumed roughly 20% of our gross domestic product. According to the Congressional Budget Office, over the next 40 years if we just keep government programs the same as they are today, government will grow by 82%, consuming more and more of our national income.

So the stakes are high, and the moment to change course is now. Today, the baby boomers are an economic engine that drives our economy and pays taxes. Soon, they will transform from taxpayers to tax beneficiaries, and we are not prepared.

Because of this, Democrats – not all Democrats – but those who realize this and cling to a collectivist ideology, know that time is on their side. All they have to do is stall and stop us from transforming these programs. All they have to do is obstruct the President’s ownership society agenda. For, if we fail now, with the House, the Senate, and this bold President, and Democrats take back the White House, I fear it may be too late. By the end of Hillary Clinton’s first term, nearly 15 million baby boomers will have already reached retirement age, making it much tougher to fix the systemic problems of Medicare and Social Security.

Fortunately, as with most great challenges lies a tremendous opportunity. If we act now, we can resolve this 20th century problem by building a 21st century ownership society where the individual reclaims his rightful place as the nucleus of our society, not the government.

Just consider how this could impact the main issues of the day like taxes, health care and Social Security.

Taxes:

On taxes, history has been relentless and consistent with its lessons. In 1964, Congress enacted President Kennedy’s across-the-board tax-rate cuts, and the economy expanded, jobs were created, and revenues grew as well. In 1981, in the face of stagnation, Ronald Reagan cut tax rates across the board and the economy expanded, jobs were created, and revenues grew as well. In 2003, President Bush cut tax rates across the board and what happened? The economy expanded, jobs were created, and revenues grew as well. Last year, the economy grew at 4.4%; 2.7 million new jobs were created in the past 20 months; and revenues grew by 14.7% since the tax cuts which brought the budget deficit down by $109 billion.

But, just like weeds that grow back in the springtime, so too will taxes. That is why, once and for all, we need to replace our tax system with a flatter, fairer, simpler tax code – one that rewards success not punishes it. We cannot afford to pass up the great opportunity of tax reform President Bush has given us.

Health Care:

On health care the choices are crystal clear. Everyone should be able to agree on the fact that the current system is unsustainable.

Under today’s third-party system people don’t care what things cost because someone else is paying the bills, and they really can’t shop around for quality and value because they are stuck in some closed network like an HMO. So we have a choice to make. We can either go with socialism or consumerism.

During Bill Clinton’s presidency, the American people roundly rejected Hillary Clinton’s sweeping plan for socialized medicine. So, instead, over the past ten years, we’ve been heading in that direction incrementally. Now, for the first time in a long time, with the passage of health savings accounts, we are finally on offense. HSAs and the follow-up reforms we hope to pass this year will help transform our health care system into a real market-based system. This will give individual consumers the power and resources to get access to good care and, at the same time, give them the incentive and knowledge to be real consumers. This way doctors, hospitals and all providers will compete for our business based on quality and price – rather than having the government set prices and reduce quality and outcomes to the lowest common denominator, as we’ve witnessed with socialized medicine.

Social Security:

Today, I want to focus on the issue that really defines our times – Social Security.

Social Security was created in 1935, after the onset of the Depression, at a time when government wanted to establish a system that paid benefits to seniors immediately, in order to pave the way for the young to find work, while keeping the elderly out of abject poverty. So President Roosevelt and Congress created a pay-as-you-go system, where current workers paid taxes to finance the benefits for current retirees. Back then, the numbers added up easily. An average of 42 workers paid a 2% payroll tax for every one retiree. The retirement age was 62, while the average life expectancy was 60. Go figure that one. Fifteen years later, in 1950, 16 workers paid a 3% payroll tax for every one retiree. Today, around three workers pay a 12.4% payroll tax to support one retiree, and when the Boomers retire, two workers will be supporting each retiree.

This demographic crunch has serious consequences. Even though payroll tax rates have been raised 22 times over the years, Social Security is going broke. In four years, the oldest Baby Boomers begin to retire and revenues start to drop. In 13 years, and from that point on, we no longer have enough money coming in to cover benefits. To put it in dollar terms, according to the Social Security trustees, Social Security’s unfunded liability stands at $10.4 trillion. Add the IOU’s in the trust fund and the Social Security debt grows to over $12 trillion.

What’s worse is that you have no right to the money you pay through your payroll taxes. The return you get in the form of benefits is decided entirely by 535 politicians at any given time.

As the Supreme Court ruled in the Flemming vs. Nestor case in 1960, workers have no contractual right to their Social Security benefits.

But that’s the first problem. The other problem is that even if the government miraculously came up with the $12 trillion to pay this debt and make Social Security solvent, the rate of return we will get on our Social Security tax dollars is shameful. People working today get an average rate of return of 1-1.5% on their money. My young children can expect to get a negative -1% rate of return when they retire, and that’s assuming Social Security somehow keeps its current promises. Of course, if we try to fix the problem with yet another tax increase or deep benefit cuts those bad returns just get much worse.

And this is what most Democrats defend. In fact, their latest line is that there’s no problem at all.
They say the “trust fund” is fine until 2042 – and that’s 37 years from now. While I may be young, I wasn’t born yesterday. The Social Security trust fund is not a bank account with money earning interest that we can suddenly draw from to pay out benefits for 37 more years. The Social Security Trust Fund is, quite literally, a metal filing cabinet in Parkersburg, West Virginia, full of IOU’s from the money that has been raided from Social Security since Lyndon Johnson made it so in 1968. It’s not a bank account with cash, or stocks, or bonds. It’s a filing cabinet full of paper promises. Either way you look at it, in 13 years we don’t have the money to pay all the benefits. If we do nothing until then, we will have to either raise taxes, cut benefits, or borrow more money – that’s all an IOU gets you.

But perhaps the opponents of reform understand this issue after all. For if workers are free to choose a personal account that they can own and control and pass on to their loved ones when they die, then they don’t need a politician to protect their benefits when they retire – they need an investment advisor! When that happens, the political party that sees itself as the government party is no longer indispensable. I would like to think their opposition is more sincere than that, but based on their rhetoric, I find it tough to conclude otherwise.

Consider a few facts. Under the current system, a 40-year-old low-wage worker, let’s call him Ted, who earns $20,000 a year will get a monthly benefit of $1,172 when he retires, provided Social Security can pay this benefit, of course. Under Social Security legislation I introduced with Senator John Sununu of New Hampshire, workers keep around half of their payroll tax for their accounts – 6.4% on average. If Ted chooses an account and sticks with the default plan of safe index funds of 2/3 stocks, 1/3 bonds, using historic returns, he will end up with more than $347,000 in his account. His monthly benefit will be $2,762. That’s a benefit increase of about 135%.

And consider a 40-year-old couple. Let’s call them Harry and Nancy, who each earn $35,000 for a total of $70,000. In our bill, in a 2/3 stock, 1/3 bond fund, they will have nearly $830,000 in their account. Under the present Social Security system, when they retire in 2032, they are supposed to get $3,133 per month. With this private account, their monthly benefit would be $6,605. And when Harry and Nancy die, the account goes to their heirs, not the government.

How can this be? Because as Albert Einstein said: “The most powerful force in the universe is the power of compound interest.”

You see, I don’t fear the politics of this issue because the truth is on our side. But it’s vital that the American people come to know the facts. If those in or near retirement are held completely harmless, and if all other Americans are given the freedom to choose a personal retirement account where they can get a decent rate of return on their money in their account that is a part of their private property, that goes to their loved ones when they die, then I fear for the politician who stands in their way and instead crams a big tax increase down their throats.

I say to my friends on the left: If you were one of the most liberal, left-wing socialists, you couldn’t come up with a better way to bridge the wealth gap and

decentralize the concentration of wealth in America than to adopt personal accounts like those we are proposing. According to the Social Security actuaries, under the Ryan-Sununu bill, in 15 years, workers will have $10.7 trillion in their individual accounts. That’s $10 trillion in the account of willing workers that otherwise wouldn’t be there.

You see, with personal retirement accounts, every worker is both a laborer and a capitalist. Every worker is an owner of our economy and free enterprise system. And yes, if you are a stakeholder in capitalism, then you probably don’t want a politician who’s preaching socialism. And so yes, to our modern liberal friends, Social Security could be the force that closes the book on collectivism, but after all, with this reform people will be better off, and shouldn’t that be what this is all about?

Conclusion:

The good news is that the facts are on our side. The founding principles of individual liberty and opportunity that have guided our nation since its inception are on our side.

And freedom is on the march abroad and on the home front.
Over the last two decades, we’ve witnessed many moving scenes as the people of several nations have emerged from the shadows of totalitarian governments and tyrannical rulers. We watched their exhilaration as Eastern Europe and the former Soviet Union opened up to the world of freedom.

The latest chapter of this push for freedom unfolded last month with Viktor Yushchenko’s inauguration as Ukrainian President. And, of course, the inspiring sight of free Afghans and Iraqis voting for their own leaders is still fresh in our minds.

As the standard-bearer of democracy and individual freedom, the United States is leading more and more of the world to embrace these principles. It would be tragic and ironic if relentless government expansion here at home took away our own citizens’ freedom and opportunities, just as the people of other nations begin to reap the benefits of our example of liberty.

We must show the world that a mature democratic republic, rooted in individual rights and liberties, can reach the next level and become a true ownership society, where every citizen benefits from freedom and every person has the opportunity to reach his or her potential.

We can show that the European decline into stagnation and “tyranny of the bureaucracy” is not inevitable. And we can ensure that the rugged individualism that defined America in its early years is renewed rather than forgotten.

Friedrich Hayek rightly observed that “even a strong tradition of political liberty is no safeguard if the danger is … that new institutions and policies will gradually undermine and destroy that spirit.” So we must move forward with care to reshape government institutions and policies that, if left alone, ultimately harm the American spirit. We want a nation where all citizens feel empowered to pursue a good life for themselves and their family, where everyone can use their talents and creativity to contribute something wonderful to this world. We want to encourage Americans’ initiative, self-reliance, and generosity of spirit – not diminish these virtues by making government a sort of surrogate parent in charge of all.

And to my fellow Republicans who tell me: let’s hold back – we can’t risk losing our majority, I say what’s the purpose of being in the majority if we don’t do anything with it? If we do act, we can ensure that the 21st Century becomes a new American century where individuals – not governments – take center stage. Thank You.