The budget-reduction package laboriously being cobbled together by Congress and the White House could have been at least $3 billion to $4 billion more convincing if the politicians on both sides had been willing to limit cost-of-living adjustments (COLAs) on Social Security and other federal pensions.
This is a highly charged, emotional issue. Groups representing retirees allege that an effort is being made to balance the budget on the backs of the elderly. "How dare you support the idea of taxing Social Security income, thus making retired people the victims of deficits, when a far greater cause of the tax shortfall is the unholy reduction of the top tax rate from 50 percent to 28 percent?" asks a reader from Takoma Park.
Few deny that the huge Reagan supply-side tax cut and the equally excessive boost in defense spending are the primary causes of the growth of the budget deficit. But that's not the issue, as Alex N. Dragnich of Charlottesville, a retired university professor, says.
"Those who say that all should sacrifice something in the battle against the deficits are right," Dragnich wrote. "We Social Security recipients should be willing to have COLAs reduced or to forgo them for a year or longer if need be."
If politicians find it too hard to tackle a reduction of, or delay in, Social Security COLAs for higher-income recipients, an alternative would be to tax fully benefits over certain income levels. Right now, private, civil and military pensions are taxed, while only one half of Social Security income is taxed for those retirees whose gross adjusted income is over $28,000 ($32,000 for those filing jointly).
Income, after all, is income. The "sacrifice" that Social Security retirees would be asked to make -- if their benefits were taxed -- should be matched, in a "real" budget deficit package, by deeper defense program cuts, reductions in other nondefense programs and tax increases that would affect other elements of the population.
None of this is taking place in the synthetic budget-reduction package triggered by the 508-point decline in the Dow Jones index on Oct. 19. And congressional enthusiasm for even that has abated with the partial recovery of stock prices.
Beyond Social Security, there is a special problem with civil service and military COLAs. Back in 1978, a commission appointed by President Carter warned that the federal pension system, especially overgenerous military-retirement provisions, could break the U.S. Treasury.
Commission chairman Charles Zwick (a former budget director) predicted that the cost for military pensions, then $9 billion, would hit $30 billion by 1998, and "over $100 billion a year within the lifetime of people now approaching retirement from the military." Zwick was conservative: The $30 billion threshold was crossed in fiscal 1986 -- not in 20 years, just eight.
For a six-year period, 1969-1975, civil and military pensions were boosted by a 1 percent "kicker" -- a bonus added onto the actual cost-of-living increase. When that proved more costly than anticipated, the kicker was withdrawn in 1976. But Congress allowed the normal COLA adjustment to be made twice a year for the next six years.
The "kicker" and the double adjustment were not applied to Social Security COLAs -- which didn't begin until 1973, 10 years after indexation was first applied to the civil and military pensions. But in 1973, a changed formula sharply boosted the actual Social Security benefits.
William G. Colman, former executive director of the U.S. Advisory Commission on Intergovernmental Relations, estimated that these special provisions have provided a bonanza to those who retired prior to 1976 and their survivors, one that will cost the nation "tens of billions of dollars over the next half-century."
Colman is a member of a lobby group called the National Committee on Public Employee Pension Systems, which contends government pensions have gotten out of hand. He insists there is nothing wrong with now asking well-to-do retirees to forgo all or part of further COLAs -- at least until the deficit is brought under control.
That is denounced, in other quarters, as a "means test." Writer Forrest Chisman asked in a Washington Post article: "What's so great about means-testing? We don't means-test public education or defense or public highways -- for the very simple reason that they are services that everyone needs, everyone pays for and everyone deserves to receive."
Agreed: It would be wrong to "means test" actual Social Security or other pensions. That would discourage those who are not yet of retirement age from saving.
But to "means test" COLAs, not part of the original bargain, is something else again. "There's no reason in God's world why well-to-do people drawing Social Security should have a COLA," agreed Colman.
Assessing his three pensions, which give him a monthly benefit up almost 300 percent in a 13-year period since retirement, Colman included himself: In the same period, the salary for the job Colman left rose by 77 percent. That's what the argument is all about.