Wrestling with Social Security

By GEORGE J. CHURCH

A Government commission sizes up a gigantic political problem

Needed: $150 billion to $200 billion over the next seven years. That is the staggering sum that the Social Security system must raise in new revenues, or save out of future benefit payments, if it is to be certain that it can keep checks rolling out to 36 million Americans between 1983 and '89. Or so the eight Republicans and seven Democrats who make up the National Commission on Social Security Reform agreed last week, in a public meeting for once refreshingly free of partisan rancor.

Now comes the tough decision: figuring out some combination of tax boosts and limits on future benefit increases that might actually yield the money. As all politicians (including the four Senators and three Congressmen who serve on the commission) know too well, any effective measures will raise howls of anguish from the young who pay the taxes, the elderly who dread any limit on benefits, or both. As expected, the commission reached no agreement last week. It has until Dec. 31 to submit its recommendations, and then it may file majority and minority reports.

Whatever the commission recommends, the task of getting agreement between President Ronald Reagan and Congress will be made no easier by the passions aroused in the mid-term election campaign, during which many Democrats accused Republicans of plotting to cut present Social Security benefits. The G.O.P. resentment raised by that charge echoed in Reagan's news conference last week. The President complained that elderly people "have been frightened to death" and assured them that "I know of no one, and especially me, who would support" any outright cut in benefits.

Still, the tenor of the commission's discussions indicates that the problem may at last be faced realistically. The reason is obvious: the day when Social Security is expected to run out of money is close enough to force painful choices. The trust fund on which Social Security pension checks are drawn had to borrow $600 million from the separate Medicare and disability funds to write the checks that went out Nov. 3. Robert A. Myers, executive director of the commission, estimates that the fund will have to borrow upwards of $11 billion more to get through the first six months of 1983. Accordingly, Commission Chairman Alan Greenspan had little difficulty winning agreement on the $150 billion to $200 billion figure. That is an estimate of how much the collections of the Social Security payroll tax may fall short in providing for benefit payments, and is based on rather gloomy assumptions about what might happen to inflation and unemployment. Under more optimistic economic suppositions, the seven-year deficit might be as low as $70 billion.

But even the politicians on the commission were unwilling to gamble that an economic boom would save them from difficult decisions. New York Senator Daniel Patrick Moynihan, a Democrat who last year leveled a charge of "political terrorism" against those who said that Social Security was on the brink of bankruptcy, groused that the $150 billion to $200 billion figure was too high, but he went along with it "in the interest of harmony."

The commission's staff has prepared exhaustive figures on the financial consequences of dozens of possible steps. The one favored by lobbyists for the elderly is to "borrow" from general revenues (meaning primarily those generated by income taxes) any funds that may be necessary. But as Commission Member Mary Falvey Fuller commented, in an era of budget deficits that could hit $200 billion a year, "there are no general revenues" to spare.

The commission seems likely to recommend forcing all federal employees hired in 1984 or later into the Social Security system. But even if state and local employees were included (a step of dubious constitutionality), that would raise $35 billion in new revenues by 1989--nowhere near enough. The commission staff identified only three main possible solutions:

P: Speed up payroll-tax boosts. The leading idea is to put into effect by 1984 increases that are now scheduled to be spread out through 1990. Estimated revenue increase: $135 billion over the next seven years.

P: Limit future benefit increases. Benefits, which are tied to the Consumer Price Index, have shot up much more rapidly than have tax collections, which are held down by widespread unemployment. The chief idea for reform: put a 4% cap on increases in 1983 and '84, and thereafter link benefit rises not to the CPI but to increases in average wages, less 1.5%. That is, if wages went up 6%, benefits would rise 4.5%. Anticipated saving: $180 billion.

P: Impose income taxes on half of Social Security benefits (because they are paid for by taxes levied on employers, rather than on workers) and put the money raised back into the pension trust fund. Estimated revenue increase: $134 billion.

All these ideas provoke bitter opposition. "Nothing is really desirable to do," Greenspan admitted. Many Republicans strongly resist the idea of tax increases, and they apparently include the President. At his news conference, Reagan remarked that "more people working for a living today are paying a higher Social Security tax than they are income tax." His point: Social Security taxes are already a heavy burden on lower-income workers, and on the economy in general.

Many Democrats are equally loath to limit benefit increases. They are under pressure from the elderly, who have an exaggerated fear that if their pension checks do not keep pace with inflation they will be reduced to eating cat food. Members of the Gray Panthers, who demonstrated outside the meeting, chanted, "No ifs, no ands, no buts, no cost-of-living cuts." In fact, there is evidence that putting a cap on benefits would be justified. Tying Social Security payments to inflation amounts to a huge transfer of wealth from the young, whose earnings are not similarly protected, to the aged, only about 15% of whom are classified by the Government as poor--roughly the same proportion as in the entire U.S. population.

In any case, no one step is likely to be sufficient. Republicans will have to agree to some tax increases, and Democrats will have to swallow some limit on benefits. If lawmakers cannot muster the political nerve to make these changes, they will run the risk of letting Social Security go broke. And the anger aroused by any possible solution would be nothing compared with the fury that voters would vent in the polling booth against any politicians who allowed that to happen.

--By George J. Church.

Reported by Hays Corey and Jeanne Saddler/ Washington

With reporting by Hays Gorey, Jeanne Saddler

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