Extensions of Remarks

9158 EXTENSIONS OF REMARKS April 27, 1988 EXTENSIONS OF REMARKS "NOTCH BABY" DILEMMA A thousands of dollars in benefits that they year as part of a new benefit formula took LEGACY OF QUIRK IN SOCIAL have coming to them. (National Committee, effect in 1975. SECURITY LAW Weekly Report p. 778) But raging inflation quickly exposed a "It's a gross injustice," said Ulan, who re problem in the new calculation. Because the tired, with his sister, at the end of 1982 and formula accounted for increases in both HON. BILL GREEN now works part time in another menswear wages and prices, Social Security benefits OF NEW YORK store in a Philadelphia suburb. "It's a terri were "overindexed"-that is, they were IN THE HOUSE OF REPRESENTATIVES ble thing they did. Millions of people out being boosted twice, and were therefore in there are hurting-and believe me, if I creasing by much more than Congress in Wednesday, April 27, 1988 didn't have a part-time job, I'd be one of tended. Mr. GREEN. Mr. Speaker, many senior citi them." For example, some retirees' replacement zens around the country have expressed an But according to the Social Security Ad rates-the percentage of pre-retirement ministration and other experts familiar with income that an individual receives as Social interest in the Social Security "notch" issue, the notch, the issue is more one of percep which resulted from legislation passed in Security benefits-soared to near 55 percent tion than of reality. for some people, well above the 35-38 per 1977. A long-awaited General Accounting Office cent rates that had prevailed until that Over the years, I have had countless dis <GAO> report on the notch, released in the point. Had the trend continued, future retir cussions about the "notch" and the concerns last week of March, buttresses their conten ees would have collected more in monthly of my constituents with the House Ways and tion. retirement benefits than they had earned Means Subcommittee on Social Security. Be Although notch babies generally do get per month while working. cause of the great confusion which has sur smaller monthly benefits than people with "If left uncorrected, this flaw would have rounded this issue, in 1986 then subcommit similar work histories who were born just bankrupted the entire Social Security before them, the GAO found that in most system," wrote former Social Security sub tee Chairman Jim Jones requested that the cases they get more-and never less-than General Accounting Office undertake a thor panel Chairman Rep. James R. Jones, D similar retirees who are younger. The GAO Okla. 0973-87), in a September 1986 letter ough study of the entire "notch" issue, includ also concluded that this situation is entirely to his colleagues. It was Jones who commis ing an analysis of its causes, a detailed review in keeping with what Congress intended in sioned the GAO notch report that was re of its actual effects on beneficiaries and an 1977 when it changed the Social Security leased last month. examination of the financial implications of formula to correct a dangerous flaw that at To correct the problem, Congress in 1977 lessening or eliminating the "notch". the time threatened to bankrupt the entire adopted a new benefit formula for all people system. born after 1916. The purpose was to stabi In late March, the General Accounting Of "The real problem is the people who are fice's review of the Social Security "notch" lize average replacement rates at a level slightly older than the notch babies who are about 5 to 10 percentage points below the issue was completed. As individuals, organiza receiving windfall benefits because of [al tions, and Members of Congress review these rates being approached in 1977, and to mistake in the Social Security computation shield them from the economic swings that findings, I would like to commend to my col formula," said Robert M. Ball, the Social had distorted benefits under the earlier for leagues and interested constituents a recent Security commissioner from 1962-73 who mula. article by Michelle M. Murphy which appeared also served as a member of the 1982-83 com "We now have a benefit formula that's in the April 9, 1988 issue of Congressional mission on Social Security overhaul. "With pretty much independent of those kinds of out these 'bonanza babies,' there would be variables," said Carozza. "An average Quarterly: no notch." LAWMAKERS RESIST COSTLY "CORRECTION": Still, the perception of inequity-exagger worker from now on gets a replacement rate "NOTCH BABY" DILEMMA A LEGACY OF of about 41 percent." ated, some members of Congress believe, by To cushion the impact on people who QUIRK IN SOCIAL SECURITY LAW scare tactics and inflammatory mailings <By Michelle M. Murphy> were beginning to retire in January 1979, sent by the National Committee-has been when the new formula was first applied, To 67-year-old Sidney Ulan of Walling enough to fuel a controversy that has Congress phased in the change for those ford, Pa., the issue is straight-forward: He dogged legislators since 1983, when it was born between 1917 and 1921. People born and his 72-year-old sister, Gertrude War first aired in a letter to the columnist "Dear during that period were allowed to use wick, earned almost the same amount of Abby," herself a notch baby. either the new formula or a special transi money during the 33 years they ran the "I don't believe that there has been an tion formula, whichever yielded the higher menswear store they inherited from their other matter that I consistently receive so benefits. parents. But he now gets $362 less each much mail on as this subject," said Sen. But there was another dilemma: What to month from Social Security than she does. Charles E. Grassley, R-Iowa, at a notch do about those who were already collect Something is wrong, Ulan believes. He hearing conducted by the Senate Select ing-and living on-the "windfall" benefits wants Congress to fix it-and he'll say as Committee on Aging Feb. 22. provided under the flawed 1972 formula? much on April 14, when he appears before Despite the attention, however, most law Taking money away from these benefici the House Ways and Means Social Security makers have danced around the issue of aries, born between 1910 and 1916, seemed Subcommittee. "correcting" the notch through legislation. untenable, so Congress decided to let them That day, the panel will examine what The reason is clear: the cost. continue enjoying their "bonanza." some Iowa presidential-campaign organizers "The bills that have been introduced ... This solution also had a catch: It is with earlier this year dubbed "the issue from are very expensive: The cost from 1988 to these retirees that people born in the 1917- hell": a quirk in Social Security law that af 1996 ranges from $24 billion to more than 21 notch now compare their benefit fects Ulan and about 7 million other people $375 billion," Michael Carozza, deputy com checks-and not with those born after 1921, born in the "notch" between 1917 and 1921. missioner for policy and external affairs at who did not have the option of using the Because of the effect their birth date has on the Social Security Administration, testified transition formula. their Social Security benefits, they have in February. "The only way to pay [for one "If anything, [the notch babies] are treat become known as "notch babies." of these proposals] would be to increase ed better, not worse, than those who come CONFLICTING PERCEPTIONS Social Security taxes or cut other benefits." after them," said Ball. "But they wanted to The notch babies-and the main lobbying ORIGINS OF THE NOTCH be compared with those who came before." group promoting their cause, the controver The story of the notch babies really began That argument does not go very far with sial National Committee to Preserve Social in 1972, when lawmakers decided to formal notch babies like Sidney Ulan. He knows Security and Medicare-argue that they are ize the ad hoc system of Social Security ad what he sees: Despite a very small differ the victims of blatant discrimination by justments they'd been using since the pro ence in their total taxable earnings during Congress and the Social Security Admini gram's inception. The automatic cost-of their careers-he earned $183,556.50, while tration. They say they are being deprived of living adjustments <COLAs> adopted that his sister earned $185,531.41, about $1,975 e This "bullet" symbol identifies statements or insertions which are not spoken by a Member of the Senate on the floor. Matter set in this typeface indicates words inserted or appended, rather than spoken, by a Member of the House on the floor. April 27, 1988 EXTENSIONS OF REMARKS 9159 more-he collects $462 from Social Security "I speak frequently to people who think told representatives of the International Hel each month, while Gertrude, a bonanza they have been cheated out of Social Securi sinki Federation that there may be "several ty benefits because of the so-called 'notch,' baby born in 1915, gets $824. thousand" whose cases they are unaware of. "I think it's understandable," said Car but I tell them that no one is being cheated ozza. "Everybody wants to get the most that out of anything-and the GAO report Among the 350 political prisoners that I they can, and if there's somebody who's get proves it," said Kermit Phelps, chairman of mentioned are 12 of the approximately 75 per ting more who's in a similar situation, I AARP's board.

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