contributions you and your employer have made to the system, not what its projected benefit will be. To try to keep records, I would not know where you would start to get records to indicate what an employee has earned under the social security system which could be carried with his employment record through his working life. So that in order to institute a software or hardware program that would be able to respond to this legislation would be cost prohibitive to the part of the Social Security Administration. And never mind the cost to the private sector in trying to meet the terms of this bill from the legal, accounting, and actuarial cost associated with making the adjustments to the current pension laws. In summary, I would like to indicate to this committee that I have specifically limited my remarks to the technical areas which cause this bill to lack the fundamental ingredients necessary for it to be considered good legislation. I am personally surprised that this bill has reached the level that it has within the legislative process due to the fact that it is ill-conceived and clearly has lacked study by its proponents. There is only one provision of this bill which should be considered as separate legislation at another time specifically dealing with the Keogh limits as they are currently provided for in the law. All the other remaining provisions of this law do nothing but to remove incentives and to take away benefits that all citizens within this country have earned to date. It has been implied in reading on this bill that this proposed legislation purpose is to generate tax income for the Treasury, if passed. It is inconceivable to me how any positive tax revenue would be generated by this House bill. I would like to thank the committee for the opportunity to present these remarks today and hope that my comments along with others, will be considered strongly. [The prepared statement of Mr. Clarke follows:] PREPARED STATEMENT OF JOHN J. CLARKE, JR., BALDWIN & CLARKE PENSION The purpose of this paper is to shed insight into the practical application of the proposed legislation by Representative Charles Rangel, known as the Pension Equity Act of 1982. It is hoped that this paper will assist legislative assistants and legislators in concluding that the above mentioned legislation is in fact bad legislation and should not be given the courtesy of coming out of the House Ways and Means Committee to be presented on the floor of the House of Representatives. contention that this House Bill is bad legislation is based upon four premises. The first premise that Representative Rangel did not consider in drafting this legislation was that of "Enlightened Self Interest" which is an inherent human factor in making the capitalistic system work. The capitalistic system functions so well as an economic theoryy, due to the fact that it gives monetary incentives and motivations to people to allow them to want to take the financial risks in their business or profession in order to gain the incentives that the system will reward for such efforts. This Bill through its regulations clearly removes incentive and motivation for any businessman to want to establish and/or maintain a qualified retirment plan for himself and his employees. This Bill, in my opinion, would be disasterous to the private pension system as we know it today causing wholesale termination of qualified plans and resulting in tens of thousands of employees to lose benefits which they are currently earning under the present pension system. The second premise of why this Bill is bad legislation is the fact that it runs against one of the dire needs of this economy today and that is capital formation. It has long been recognized that the private pension sector of our economy is one of the major areas of providing capital for investment within our economy. If anything, we need to create more incentives to allow individuals and corporations to set aside funds which will be used to stimulate the economy and create more jobs and increase demand for the goods and services provided by the business community. To be specific, for a moment, Congress has been hearing testimony on legislation which would allow qualified pension plans and retirement programs to invest their funds in home mortgages to help bolster the housing industry. This Bill would obviously reduce the amount of capital that would be available to support an industry which is vital to the total structure of this country today. Thirdly, this Bill, practices discrimination of the worst kind. It singles out a type of business form, specifically the personal service industry (accountants, attorney's, architects, sale representatives, medical and dental, etc.) to be treated differently under this proposed legislation. The only basis Baldwin & Clarke why this particular group of individuals should be singled out for special treatment is to politically try to make this legislation more palatable to the electorate of the Representatives who would support such legislation. Finally, and most disturbing to one who is involved directly in doing the administrative work for qualified retirement plans, is the fact that the Bill is unworkable from an administrative standpoint. The proposed legislation calls for sweeping changes. in the Social Security integration rules which mandates that employers are to keep accurate records relative to the accrued Social Security benefits in which the employees have earned while employed with that specific employer. It is currently impossible to receive from the Social Security Administration at any time prior to within two years of normal retirement date of what any of us have earned relative to benefits under the Social Security system.. The cost to the Federal government and its citizens to provide the software and hardware for the Social Security system to provide the information that this legislation calls for would be counter productive to the current congressional philosophy of cost cutting as it relates to regulatory areas. The cost to implement this Bill to the private sector of our economy in legal, accounting and actuarial services, along with the cost necessary to update the information system within the public sector, e.g., Social Security, makes this legislation complex and unworkable. In summary, I would like to indicate to this Committee that I have specifically limited my remarks to the technical areas which cause this Bill to lack the fundamental ingredients necessary for it to be considered good legislation. I am personally surprised that this Bill has reached the level that it has within the legislative process due to the fact that it's ill conceived and clearly has lacked study by its proponents. There is only one provision of this Bill which should be considered as separate legislation at another time specifically dealing with the Keogh limits as they are currently provided for in the law. All the other remaining provisions of this law do nothing but to remove incentives and to take away benefits that all citizens within this country have earned to date. It has been implied in reading on this Bill that this proposed legislation purpose is to generate tax income for the Treasury, if passed. It is inconceivable to me how any positive tax revenue would be generated by this House Bill. I would like to thank the Committee for the opportunity to present these remarks today and hope that my comments along with others, will be considered strongly. Baldwin & Clarke Mr. JEFFORDS. Thank you for coming along. We will take a close look at this. It has raised serious questions in my mind. Thank you very much. Mr. CLARKE. I think people concerned about social security benefits, retirement income, have to be concerned about this bill. There is no question they are going to lose twice. Mr. JEFFORDS. Thank you. Mr. Jordan Cole. STATEMENT OF JORDAN COLE, PUTNEY, VT. Mr. COLE. Thank you. First I would like to make a comment about the various scornful remarks that seem to be made about politics and politicians. It seems to me your being here and our being here today is part of that process. The one visit I did make to a Congressman at one time impressed me with the tremendous number of hours, the intensity of responsibility, and I know the last 24 hours, we are certainly aware of what you have been involved in. I think all of us pay tribute to the staff that makes these conferences possible. You certainly know it. Mr. JEFFORDS. I sure do. I think those are very appropriate words. They, obviously, spent a lot more hours putting the hearings together than I do. I know the tremendous amount of time that goes into trying to accommodate everyone at the time they desire to be accommodated. I want to express my appreciation again to the staff. Mr. COLE. I can appreciate that. I can also appreciate the fact that a part of your pay is the attention that you do get, because I know what it means to be in the public eye. And we either enjoy it or we don't. You could not be paid enough to do the kind of work you do and take the responsibilities you do if it wasn't the satisfaction you get in other ways. I think also it is possible and appropriate to pay our respects to the media, without whom the general education of the public would not be going on, so that there would be the support for the kind of things that you with your role as voting and framing legislation and the technical experts that you depend upon, it just won't work if the public was not widely educated. And I think we are very much in debt to them. I have also been impressed sitting down here, as I have been in the back, to find a way in which not only you seem to show us some attention to what is going on-and your remarks indicate an awareness-but a lot of attention among the people here. Their eyes are still open. There seems to be a great deal of interest here. I am very much encouraged with the whole democratic process by which people are willing to give their time and interest sometimes when they are not directly affected. I speak for myself. Although I have been asked to speak by groups in which I play an active role and which I will list later. Our entire discussion of social security, employment and savings, and pension programs has little meaning if the present inflationary policies continue. Again may I comment that I was told a long time ago that I will tell people nothing new, but I may be able to call to their attention something they already know. Sometimes when I write what I am going to say, I am so bored by it, it seems so obvious it seems not worth speaking. But I am saying it anyway. Inflationary policies are really making difficult or impossible the planning that a lot of us would like to be able to make. As you know, all of us know Government borrowing is a major factor in the high interest rates and in inflation. Yet a member of an older generation, my father, told me, decades ago, that wars are the major cause of Government debt and inflation which follows. To perhaps be a little bit cruel, many of us are willing to inflict pain on others in wartime, including the soldiers that we send, and sailors, but we are not willing to pay the costs in money. And we try to pass that on to our children and those who follow them. I know that many of those in the military know these facts. The founder of the nuclear submarine fleet told a Senate committee very recently, and I viewed the videotape of it, and if you have not seen it I wish you would, his expectation is that nuclear war will obliterate the human race and life on the planet within a very few years. But even if we do draw back and reverse this present confrontation, the military expenditures of the United States are at this moment not only threatening vital human service programs, but more importantly, destroying the ability of a large proportion of our citizens to plan for their retirement. Those like myself who are living on social security and small savings in retirement years find that Government borrowing causes us to pay three times for the goods and services that Government acquires. Through our taxes, of course, we are going to pay the base cost. Second, we pay interest-everybody knows that to the fellow citizens who already have a surplus that they can lend, and therefore they like myself—and I bought not long ago some CD's at between 16 and 17 percent-the cash price will be doubled within 3 or 4 years. So some of us have a little extra. But again, all of us who are part of the expenses of Government will be paying the taxes that those who lent money and have high enough income so that they escape, as you well know, by buying Government tax exempt securities, escape taxes, the rest of us pay for. So we pay three times. And of course I talked this week again with Robert Fulton, counsel for the Senate Budget Committee-he happened to be at another senior conference. And he was going to cost out, he said, really the advantage that people get out of buying tax-exempt bonds, and how much of that money is recovered by the Government through its income tax program. Another point that I think is significant. If you are concerned about employment for seniors, and I know that in the written materials that I have read of your extended statements you are concerned about not just social security, but employment, private pensions and all the rest, I think you may also know, but perhaps need to be reminded, that the dollars spent on the military produce fewer jobs than dollars spent on housing, cars, and similar goods in general. So I believe, for instance, that debt, private and Government, high interest rates and inflation, in all its aspects, are at an in 98-453 0-82--9 |