PACT America Defined - Podcast Transcript

November 2005

The following transcript is for the podcast entitled “PACT America Defined.”

Welcome to the PACT America Podcast.

It's kind of a rainy day outside, but it's refreshing. A lot of the leaves have already fallen from the trees, but some of them still have some color left.

There's actually a ladybug sitting on my pop filter right now; we'll see if she moves before this speech is over.

Anyway, I'd like to read something from the first page of my report. In December and January of 2004-2005, I wrote a 57-page report about my plan for Social Security reform.

Anyway, I'll just start reading from the first page here...

“PACT America: The Patriotic Americans Collective Trust. The definition of the word ‘pact’ is ‘a written agreement between two or more people or states.’ The word ‘trust’ may either be defined as ‘the belief in the honesty and reliability of others’ or ‘assets held for a beneficiary.’ Therefore, this program will create a written agreement between the citizens and our government. We citizens will make it known that we place our trust in America and in its future. In return, the government will agree to abide by sound fiscal policy. When it comes right down to it, there is nothing average about the average American, and we exceptional individuals will restore a solid financial foundation to this nation so that Democracy shall never perish from the land.”

Now, that sounds (laughter) a little bit intense, but basically if you've taken a look at my website, you've probably seen some things that say like “Restore the Trust” or “Restoring the Trust.” And the reason I picked that particular catchphrase is because the main problem with Social Security right now is the fact that we have a trust fund, and this trust fund was supposed to be used to help pay for the retirements of the Baby Boom generation.

Back in 1983, there was a commission led by Chairman Alan Greenspan, and what they decided was to raise the payroll tax above what was currently needed to pay out benefits and then to start stockpiling these excess taxes into a trust fund. That way, when the Baby Boom generation started to retire, it wouldn't place an excessive strain on the next generation, because they would have been paying in extra taxes over the course of their careers, and these taxes would then be used to help pay for their benefits.

Now, the problem was that the politicians just couldn't keep their hands off this money. Each year, they borrow out of Social Security's trust fund, and they've spent the entire thing. Now they've given us these bonds, but these bonds are going to need to be paid back when we need the money to pay out the benefits.

So where is this money going to come from? You know, we've already got huge budget deficits; we're borrowing money from countries like Japan and China. So where's money for the Social Security trust fund? Where are we going to get that money?

And I think that's the real crisis facing Social Security. Don't talk to me about the stock market or bankruptcy, because that's just a bunch of... I don't know; I can't say it on my show. (sigh)

So, I'll continue reading...

“Many Americans took advantage of the recent low interest rate environment to refinance their homes. By converting a higher interest rate mortgage to a lower fixed rate, the mortgage holder will save thousands of dollars in interest payments over the course of the mortgage. Therefore, this low interest rate has been a blessing for many American homeowners. However, one of the disadvantages of low interest rates is that savings accounts now earn very little interest. This has hurt many elderly Americans who rely on the interest payments from their savings to supplement their fixed retirement incomes. While American savers are currently being penalized, the holders of our national debt continue to enjoy higher interest rates.”

Right now our national debt is somewhere around $8 trillion. It averages about 4.5% interest rate, but there are some portions of the debt like Treasury Bonds that average higher rates like 8%. So these wealthy bondholders and foreign central banks are earning high rates of interest when our own citizens are receiving barely anything on their savings.

So we taxpayers are paying these high interest rates on the national debt, because it's our tax money that pays for this. But we're not getting anything in return.

“So the theory behind this plan is to refinance our national debt at a lower rate. When a person refinances a home mortgage, the existing home loan must first be assumed by a new loan. This means that the new loan must first pay off the existing balance on the higher interest rate loan before it can begin to charge the new lower interest rate. Therefore, in order to refinance the national debt, we as Americans must first pay off the existing debt. However, it would be virtually impossible to pay off the entire balance at this time. This plan will begin to slowly refinance those parts of the national debt that are issued at the highest interest rates, and it will also refinance the Social Security trust fund. Therefore, this program will restore a strong foundation to Social Security while also providing future generations with a new level of retirement security through personal pension accounts.”

Now, what I'm saying here may sound a little bit complicated, but I'll try to make it easier.

Okay, this trust fund that we need to pay benefits for the Baby Boom generation, it's at about $1.6 trillion right now. And according to the Social Security Administration, the effective interest rate on this trust fund is 5.7%. That means it's earning 5.7% interest.

Now, when we need to repay these bonds, we're going to get new bonds. So somewhere along the line, we're going to issue these bonds to someone, and then the money that they give us for these bonds we're going to use to pay back the Social Security trust fund bonds.

Okay, so why would we want to start selling these bonds at 5% or 5.7% interest to China and Japan when we as Americans are barely getting that interest on anything right now?

So I'm saying, “Let's create a program where average hardworking Americans can start putting their money into these bonds and earning this 5.7% interest.”

So right now pensions plans in America are chronically underfunded; a lot of them, a lot of these companies are going bankrupt and just dumping huge pension losses on the government. And you know, besides that, hardly any, hardly anyone ever works for the same company for 20 or 30 years anymore. You know, you might work for one company for a few years, then change to a different company. So are you really building up any pension assets?

So, I mean right now pensions are kind of a thing that's being phased out in favor of these 401(k) accounts. But the problem with 401(k) accounts is now how much you put into the account is dependent upon how much you have to invest. So 401(k) accounts are penalizing certain demographics.

Can you imagine being a single mother and trying to find money to put into your 401(k) account?

Like she's going to say, “Okay, I need to worry about my retirement instead of feeding my kids.” It's not going to happen. So you've got a lot of people who really could use retirement security, or the additional security provided by a 401(k) account, but they just can't afford to contribute, or contribute at the level of their coworkers. So why should these coworkers who are able to contribute more have a higher level of retirement security when they do the same job?

So we've got defined benefit plans like pensions on the one hand and defined contribution plans like 401(k)'s on the other, but we need to find a balance or a middle ground between the two. And that's what my plan is designed to do.

I'd like to change gears here for a second and read an e-mail that I've been working on. I'm planning on sending this e-mail to legislative assistants for Social Security for all the members of Congress.

If you've taken a look at my website, you can see that there's a section called "How I Attempted to Contact Every Member of Congress." Back in March and April, I faxed a copy of my plan to every single Congressional office in America. Well I shouldn't say every single office, but all the fax numbers that I could find. I went, I went to every single Congressperson's website and went to the contact page or the feedback page and looked up what their fax numbers were for their Washington DC office and their district offices. And then I made a huge list of all these fax numbers and just started dialing them up and sending copies of my plan or summaries or other letters.

It took me about a month of working around the clock to get this whole thing done. I estimate that I sent out about 24 or 25 thousand pages of faxes during this time period, and the phone company even cancelled the service plan because of it. Evidently unlimited long distance really isn't unlimited. But that's another story.

One of the reasons I felt like I needed to fax was because due to security concerns, most of these offices, most of these offices aren't accepting mail. And while they have e-mail's, you can't send attachments, or sometimes they have forms where you have to like type in your address and if it doesn't match a certain ZIP code, they won't even let you send it in.

Well, while I was in DC last month, I noticed something. I figured out a way to get a list of legislative analysts or legislative assistants for Social Security, and I also was able to like kind of figure out the naming conventions that they use for e-mail addresses. The House has one convention or one standard that based on their name... I'm not going to say it because I don't want everybody to copy my idea, and I want to make sure that I have a chance to do it first. But basically I was able to figure out how to create e-mail addresses based on these names of these legislative assistants.

So I'm going to send them directly to the people who need to read it, and hopefully I'll get some responses.

Okay, I'm going to click over to my computer screen, and I'm going to read the e-mail that I'm working on right now.

“The other day, I happened across an article that I had tucked into my bag while waiting at the Atlanta airport on October 12th. It is entitled ‘Pension Agency Critical of 2 Bills,’ and talks about the PBGC, the Pension Benefit Guaranty Corporation, and how it is critical of recent ideas for pension reform. Coincidentally, I was in Washington DC the previous day to discuss a reform proposal with legislative assistants for Speaker of the House Dennis Hastert and Illinois Senator Dick Durbin. I wish I would have known to drop by some of these other offices and drop off a copy of my plan.

“Anyway, my proposal combines pension reform with Social Security reform. The only major issue with Social Security is the fact that its trust fund is in the form of bonds which will soon need to be repaid in order to pay out full benefits for the Baby Boom generation. Given the state of our current budget deficits, it will most likely be extremely difficult to find new financing for these trust fund bonds. That is where pension reform comes into play.

“Do you remember the idea set forth President Clinton which was entitled ‘USA Accounts’? This proposal is similar, but it is a more practical and feasible way to implement this idea. I am calling them ‘PACT America’ accounts, and essentially they are add-on accounts for Social Security that will implement a plan of personal pensions.

“The government agency that regulates pensions, the PBGC, currently collects a minimal insurance premium in order to insure corporate pensions. My proposal is to restructure this funding model by also requiring corporate pensions to direct a certain percentage of pension assets into individually held accounts invested in government bonds. Each employee will own his or her account, which will him or her to change jobs while still keeping a core benefit. The bonds in these accounts will serve as collateral for the government to insure the pension, and they will also be used to pay back the Social Security trust fund bonds as these bonds are needed to be refinanced.

“I hope that you can now start to see the potential for this proposal."

And then I've included some links to my webpage and said...

“Please take the time to read through this material and do not hesitate to contact me with any questions or comments that you may have. Thank you for your time, and I look forward to hearing from you.”

So, hopefully I'll get a few responses, and we'll see what happens.

Well I think that's probably a good place to end this podcast. The sun's setting outside as I look out my window. It's still raining a little bit, and it looks like the ladybug is still on the pop filter. She crawled down a little bit, and it looks like she might have fallen asleep there so... (laughter) Hopefully this podcast wasn't that boring, but I'll see you next time.

This is Adam Florzak keeping it real.