EVERYONE WAS delighted when Congress and the president "solved" the Social Security problem in 1983, putting the system back on a supposedly sound financial footing. Now it turns out that the solution itself has problems. The Social Security system may not end up that much better off than before, and the government in general could end up worse off.

The plan made perfect sense at the time. The idea was to increase future taxes while moderating benefits to produce a giant surplus in the trust funds while the baby boomers were still in the work force. The surplus would then be drawn down in the next century to support the boomers when they retired.

That would be fine if Social Security were the great savings account in the sky that people think it is. But contrary to the mythology so assiduously built up over the years, it is much more a pay-as-you-go operation. The trust funds are merely accounting devices; there is no real accumulation of funds. Social Security dollars are not kept apart. They merge indistinguishably with all the others that flow into and out of the Treasury each year.

Social Security revenues are currently greater than costs. The extra dollars are simply being used to help finance other government programs. In that sense there is a form of double-counting going on. The same dollar is being counted on to support the future Social Security program and to reduce the current deficit. When the boomers do start to retire, the government will still have to 1) dig up more revenue to help pay their Social Security benefits; or 2) cut the non-Social Security programs the surplus Social Security revenues are now sustaining. There continues to be a crunch in the future. In the meantime, the regressive Social Security tax is also playing a larger role than before in federal finance. It is helping to pay for defense and the rest of general government as well as Social Security, and in that sense supplanting the progressive income tax.

The problem will become worse as the 1983 plan takes full effect. The "surplus" will grow to an estimated $12.7 trillion by the year 2030; that is $2.2 trillion in current dollars. But the government currently has no way to put such a sum in a genuine reserve -- to "save" it, in the conventional, retrievable sense. Nor is it entirely clear that the political system could ever muster the will to do so; the temptation of that much candy in the candy jar would be too great. What to do?

Nothing while the deficit remains so large; the first goal of policy has to be to get it down. Then two possibilities occur. One would be to keep collecting the surplus Social Security taxes but create a serious savings mechanism through which the government could invest in items other than its own securities. The other would be to ease the tax rate until the boomers are much closer to retirement, stop using Social Security to mask so much of the deficit and force the rest of government back on the taxes on which it belongs. Either way would be better than what we are doing now, which is fooling ourselves