The Spreading Call for Change

Like the flag and motherhood, "the old-age, survivors, disability, and health-insurance program," popularly known as Social Security, has long enjoyed an almost sacrosanct status with politicians and the public. Basically a Government-administered plan under which retired workers receive as a right financial benefits paid for in taxes by employees and their companies, the once modest program has developed into a mammoth system that touches the lives of practically every American. Despite the program's undiminished popularity, however, payroll deductions to pay for rapidly growing benefits have soared in recent years, with the most painful burden falling on low-income workers. That trend has led to increasingly insistent demands for fundamental changes in the way that the program is financed and operated.

The debate intensified last month when Congress approved a bill increasing Social Security benefits by 11% this year--7% in April and the rest in July. That means, for example, that the average monthly stipend paid to an elderly couple will go first from $277 to $296 and then to $310.

Upward March. The measure, which the President is expected to sign, constitutes the fifth such boost in the past five years. During that time, monthly benefits for the nation's 29 million recipients have climbed by more than 70%. The main reason for granting the hikes, of course, has been to keep benefits received by the aged, the disabled, dependents and survivors of deceased workers ahead of the runaway pace of prices. Benefits are certain to continue their upward march because starting next year an escalator clause already approved by Congress will increase payments automatically as living costs rise.

For many of the nation's 90 million workers and their employers who contribute to Social Security this clause all but guarantees an ever-expanding tax outlay every year. Middle-and upper-income workers will begin paying for the latest boost in January, when the base on which the tax is collected is extended from its present $10,800 to $13,200. That means that the maximum deduction will go from $631.80 in 1973 to $772.20 this year, even though the tax rate will remain firm at 5.85%

On top of that, some $3.8 billion of the regular federal income taxes that workers pay this year will go to underwrite a new Supplemental Security Income program (SSI). That system begins this week and will be run by the Social Security Administration, but paid for out of general revenues. The program is designed to replace and upgrade federal-state welfare payments for most needy aged, blind or disabled Americans who receive only minimal Social Security benefits, or none at all. More than 6,000,000 people are expected to be receiving SSI benefits this year. Though the program will not force any immediate boost in income taxes, it could be a factor in future rises.

Smaller Burden. Some strong proponents of Social Security urge that the Social Security Administration be allowed to tap general revenues to finance part of its regular benefits, too. They contend that such a shift would lessen the burden on moderately paid workers. The main argument against financing Social Security entirely out of the special payroll tax is that a worker earning, say, $5,000 a year pays proportionately much more than a corporate chief who makes $200,000; though the rate for both is 5.85%, the tax is levied on the low-paid worker's entire income but on only the first $13,200 of the executive's salary. Yet many experts believe that a shift to general-revenue financing would rob the system of its biggest asset: the support it gets from workers who feel that their contributions are directly financing their own eventual retirement benefits.

Another suggestion for mitigating the payroll tax's regressive nature comes from Brookings Institution Economist Richard Nathan. He would increase the wage base from which deductions are taken to as high as $25,000 and work out some formula to reduce payments by less affluent Americans. A more likely solution is a plan that would give workers earning up to $5,600 a special income-tax credit to offset Social Security levies. Such a plan was included in the Senate version of the bill raising benefits last month, but it was dropped by the Senate-House conference committee. As part of the compromise, however, the House agreed to study the idea further this year.

Other modifications in the system are also being demanded. One would allow a husband and wife to combine their earnings for purposes of computing benefits instead of calculating them on the basis of their separate earnings records. That change would produce larger benefits for many retired couples who had both been wage earners. Another suggestion calls for extending the same rights enjoyed by dependents of male workers to those of women employees, who at present face stiffer eligibility requirements.

Since the enactment of Social Security legislation in 1935, conservatives have favored scrapping the system altogether. Economist Milton Friedman, for example, has long espoused a negative income tax as a substitute for Social Security with payments going only to those who could prove they were in need. Ideologically, conservatives would prefer to have workers depend on freely chosen pension plans rather than a mandatory social insurance scheme. But that alternative generates little enthusiasm at a time when many private pension plans are shaky. In any event, though modifications in the system will probably have to be made, Social Security is in no danger of fading away. For all its flaws, the system's deep and widespread support makes it all but invulnerable to basic attack.

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