• U.S.

Sparring over Social Security

4 minute read
George J.Church

How long will it take the wolf to get to the door?

“Political terrorism!” shouted New York Democrat Daniel Patrick Moynihan. “You are coming in here cry ing crisis! crisis! bankrupt! bankrupt!”— a devious maneuver, he charged, designed solely to help the Republican Administration balance the federal budget. Secretary of Health and Human Services Richard Schweiker icily replied: “That is completely false, absolutely false.”

The explosion occurred at an occasion that in other years would have been soporific: a Senate Finance Subcommittee hearing to consider the Administration’s annual report on the Social Security trust funds. The exchange underlined the extent to which the financial woes of Social Security are becoming a nightmare for elected politicians: a pressing problem whose every solution offends some group of highly vocal constituents.

The trouble by now is well known: Social Security benefits, pushed up by inflation, are rising much faster than Social Security tax collections, which have been held down by persistent unemployment. But the latest report added two frightening brush strokes to this dismal picture. First, it predicted that as early as a year from now, the main trust fund out of which retirement benefits are paid might be so depleted that the Government could no longer send out pension checks on the third of each month; the checks might have to wait until more tax money could be collected. That assumes the worst of five possible combinations of inflation and unemployment rates that the Administration studied, but the other estimates are only marginally more cheering, if at all. Under a middling set of projections, the retirement trust fund would be out of cash entirely by fiscal 1984 (see chart).

Borrowing from the separate Medicare trust fund might postpone that dread day—but, said the Administration, the Medicare fund is in trouble too. Though Social Security tax collections earmarked for Medicare are running ahead of disbursements right now, hospital bills are rising so much faster than prices in general that this situation will not last. In fact, the Medicare fund itself might be empty as early as 1989.

Senate Democrats complained that the Administration was emphasizing “worst case” figures that are much more gloomy than the inflation-unemployment estimates it used to draw up its overall budget. New Jersey Senator Bill Bradley accused Schweiker of keeping “two sets of books.” Moynihan charged that the Administration wanted to stampede Congress into legislating benefit cuts that would produce a surplus in the trust funds large enough to offset deficits in other Government operations. Although excess retirement funds cannot be spent for any other purpose, they are mixed with general revenues in the budget and could make it appear balanced. Schweiker replied that “not a penny” of the trust funds “would be used to balance any budget.”

While hoping for the best, the Secretary insisted, the Administration must face up to an obligation to keep Social Security solvent, even if worse comes to worst.

Political posturing aside, the debate concerns only how long it will take the wolf to get to the door. Fundamentally, there are only two ways to turn it away: raise Social Security taxes further, or reduce the future growth of benefits. The first course has virtually no advocates. Congress in 1977 enacted the biggest peacetime tax boost in U.S. history in order to keep Social Security healthy—and already it has proved inadequate.

But the elderly understandably protest any proposal to cut benefits. The Senate in May passed by a resounding 96 to 0 a resolution deploring an Administration plan to reduce benefits sharply for people who retire at age 62, and slightly for those retiring at 65. Meanwhile, Congress is anything but enthusiastic about coming up with recommendations to solve the problem. Texas Democrat JJ. Pickle, chairman of a House Social Security Subcommittee, is drafting a plan to raise gradually to 68 the age at which retirees could collect full benefits. But nobody seems to have much idea what to do about Medicare, and as Moynihan’s outburst indicates, many Congressmen and Senators would, a la Scarlett O’Hara, prefer to worry about the whole subject tomorrow. Too much stalling, though, and the solvency of Social Security just might be gone with the wind. —By George J. Church. Reported by Jeanne Saddler/Washington

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