A few week ago, the Senate Finance Committee was discussing ways to save the Social Security system from bankruptcy.
Sen. John C. Danforth (R-Mo.), an astute freshman with a dry sense of humor, looked down glumly at a pile of different financing plans on his desk and said. "Every proposal is unpopular because every proposal has to raise revenues."
Gaylord Nelson (D-Wis.), holding up a copy of his own plant to save the system, retorted with an unhappy laugh. "Well, this one is less worse than any other one I've looked at."
The exchange between the two senators just about sums up the politics of Social Security this year.
The Social Security funds are in trouble. There are 33 million beneficiaries - most of them voters - peering anxiously at Congress to see what it does to shore them up and guarantee that the monthly payments sustaining their lives continue.
The only way to save the trust funds is to reduce benefits or to raise income. Reducing benefits is unpalatable to the aged and abhorent to the dozens of lobbying organizations which represent their interests.
But raising income means raising the Social Security payroll tax - which is already at $585 a year for a worker making $10,000 and $965 a year for one making $16,5000 or more.
Many workers already have a higher annual Social Security tax than income tax. They are increasingly beginning to grumble about the weight of Social Security taxes.
So with the 1978 congressional and 1980 presidential elections coming up, lawmakers on both sides of the Hill are scurrying about looking for a solution to what may be an impossible dilemma: how to save the Social Security system and avoid the wrath of the elderly without enraging the working population with a big Social Security tax increase.
"They're nothing members of Congress find more difficult, more painful, than voting to increase taxes," said one Senate aide.
For years the Social Security system - which includes old-age and survivor's insurance, disability insurance and Medicare - has been financed by a payroll tax applicable to employers and employees alike. At present the tax is 5.85 per cent each on the first $16,500 of a worker's income. That means that where a worker is making $16,500 or more, he pays $965 a year and his employe pays $965 a year into the Social Security funds. Slight increase are already scheduled under current law for the next few years.
A combination of demographic and economic factors has placed the Social Security system in trouble. High unemployment has robbed the system of billions of dollars of income which it would have received had the unemployed been working. Inflation, meanwhile has driven up the benefit level under a cost-of-living formula which automatically boosts benefits when prices go up.
Worst of all, the ratio of retired persons to active workers if growing. There ar emore old people on pensions, and proportionately fewer people working and paying the taxes to finance the benefit for the old. The situation will be getting worse and worse over the next 75 years but even in the short run the trust funds face bankruptcy in the next few years unless something is done.
That is the starting point of the current struggles by the administration and the House Ways and Means and Senate Finance Committee with the problem of Social Security financing.
What is seldom mentioned is that everyone is coming-up with solutions which they believe will do them the least political damage.
Most of them are behaving in accord with Finance Committee Chairman Russell B. Long's (D-La.) favorite sarcastic dictum: "Don't tax you, don't tax me, tax the fellow behind the tree."
The Carter administration, for example, came up with a plan containing - among other things - these three key elements:
Obtain $14 billion from the general income-tax revenues of the U.S. Treasury anmd pump it into the Social Security trust funds. This would permit the direct payroll tax increase on the ordinary worker - the heart of Democratic Party electoral strength - to be smaller. Tresuary general revenues are dawn from a larger portion of the population, including the well-to-do, the upper income corporations.
Break the traditional "parity" between what a worker pays in Social Security taxes and what his boss pays, by requiring the employer to pay taxes for a worker on his entire salary, while the worker continue to pay only on slaries up to a certian figure.
For example , under the administration plan, in 1981, if an employer were paying a person $40,000, the employer would pay the 6.3 per cent Social Security tax scheduled for that year on the entire $40,000, but the worker would be paying only on the first $23,100 of salary. This device would, in effect, load a larger portion of the tax onto employers and avoid having to raise the tax so much on the workers, especially the lowest paid.
Avoid any general increase in the Social Security tax rate - beyond what is already scheduled in current law - until 1985. This means that the bulk of workers who make less than the maximum taxable wage, would have no added general increase until after the 1984 election, avoiding such an increase during President Carter's enable term, including a possible second term.
The Carter administration plan, in shall, whatever its merits in terms of justice of fairness, seemed to be loading most of the new burdens for Social Security onto employers, the general taxpayer and some of the higher-paid workers, while protecting the lower-paid workers who have traditionally been the bastion of national Democratis Party electoral strength.
The House Ways and Means Committee Republicans, looking at matters from a somewhat different point of view, came up with a plan designed to avoid tax increases for several years down the road, impose them to a larger extent than Carter on the lower-income workers, stock government employees with Social Security taxes and cut costs down the road by raising the basic social security retirement age from 65 to 68 around the turn of the century while also reducing the growth of basic benefits.
Here again,whatever the merits in terms of justice of fairness, this plan shifted more of the burden of taxes and of future curbs on benefits to the low-income portions of the population that aren't considered Republican can strongholds, while protecting the business community from the extra dellop of taxes proposed by Carter.
Finally, the Democratic majority of the Ways and Means Committee, in ramming its own plan through the committee 23 to 14 last week, without a single Republican supporting it, adopted a hybird.
It dropped the administration proposal for Tresury financing from general income tax revenues and for loading a higher proportion of taxes onto employers. Southern Democrats wouldn't buy thses proposals. This means that more of the new revenues will have to come from direct increase in Social Security taxes on workers than under Carter's proposal.
However, much of the new burden will be loaded onto the highest-paid employees and their employers. This is achieved by a very rapid rise in the current $16,500 ceiling on the amount of wages earned by a worker that may be taxed, with a relatively slow increase in the tax rate.
This means that the lowest paid workers won't he paying much more taxes for a while, particularly before 1971, but the higher-paid workers (white-collar, largely) will, because they will be taxed on a much higher portion of their earnings. This class of workers traditionally isn't as strongly Democratic as the blue-collar groups.
Sponsors of all three of these different proposals can and do make highly convincing arguments whytheir plan is the wisest and the fairest - and it isn't really clear who is right.
But all three impose distasteful tax increases or benefit cuts on someone, and in cach case three appears to be a dose of polities in how the thing is constructed. Sen. Nelson is certainly right in saying that no plan is very appretizing politically, and you is "less worse."