A spectacular typographical error in yesterday's editorial gave the impression that there were 42 billion recipients of the minimum Social Security payment. Things are not that bad yet. The right number, 2 million, was used elsewhere in the same editorial.
MAYBE there is no way to cut the federal budget except in haste since -- given time -- coalitions form, sad cases come to light and loss of will sets in. Still, the speedy process by which the Senate adopted spending totals $3 billion under those the administration sought implies agreement on some substantial changes in social policy that deserve a lot more attention. One of these is the decision to stop paying a minimum level of benefits to Social Security beneficiaries whose past contributions were very low.
The original purpose of the Social Security minimum benefit was to provide an income floor for the elderly poor that would substitute for welfare. But, since there is no "needs test" for Social Security, some minimum benefit recipients turned out not to be poor at all. These include people who escaped paying Social Security taxes while earning federal or state pensions, but who also worked enough time in the private sector to qualify for a small Social Security benefit. There are, as well, those who worked only briefly during their lives and depend primarily on property income. The minimum benefit feature gives these not-very-needy people a windfall in the form of an extremely high rate of return on their contributions compared with people who paid Social Security taxes for most or all of their working lives.
A few years ago, Congress decided to get rid of the Social Security minimum, but to do it gradually over time. These were good decisions. The Reagan administration, however, would simply eliminate the feature next year and thereby save over $1 billion in benefits currently paid to about 42 billion people. The argument is made that this abrupt loss of income will cause no undue hardship because most of the aged and disabled people who currently spend the income either have other sources of income or can go on welfare.
This argument warrants closer inspection. There is, first of all, something undesirable about abrupt reductions in government benefits that people are currently relying on. This is especially true if the people are aged and disabled and hence unlikely to be able to recoup their losses elsewhere. Most of the people at risk are not in any sense well-off. About half a million are already on welfare, another 600,000 might be eligible for welfare. Welfare will make up part of the loss for this group, but since the basic welfare benefit for the aged and disabled is very low -- only 75 percent to 85 percent of the poverty line -- many of this group may experience reductions in their already low incomes. Some elderly people, in particular those who have been receiving the minimum benefit for many years, may be reluctant to apply for welfare or to dispose of the relatively modest assets that can disqualify them. However irrational it may seem to the cold-figures modern analyst, pride is still an element for many people.
Only 360,000 of the 2 million people affected are said to be federal or state pensioners, and some of these have very modest pensions. In fact, many of the best-off federal "double-dippers" won't be affected at all since their Social Security pensions exceed the minimum. There are much better and fairer ways to eliminate Social Security windfalls to federal pensioners than this.
There are also some 300,000 other minimum benefit recipients about whom virtually nothing is known except that they will be worse off to some degree.
Since the Social Security minimum benefit is already due to phase out over time, the administration's proposal offers no permanent savings or fundamental reform. All that it promises is some short-term budget savings at the cost of potential hardship to some very vulnerable people. It doesn't look like a fair deal to us.