WHY IS everyone beating up on Social Security?

In an editorial deploring the slight progress embodied in the recent deficit reduction package, the New York Times lamented that "The negotiators, acting together, could have made genuinely constructive reductions, like restraining Social Security increases for the well-to-do." Writing in the Atlantic, investment banker, Peter G. Peterson thunders that " . . . today's {Social Security} policies are unsustainable." This newspaper admonishes: "There can be no credible deficit reduction without attacking Social Security and the other major benefit programs to which it is the key."

Statements of this sort are overdrawn if not absurd. There are all sorts of "credible" and "constructive" ways to reduce the deficit that have nothing at all to do with Social Security. The present deficit was created largely by cutting taxes and increasing military spending. Collectively, Social Security retirement payments, interest on the national debt and programs for the poor add up to roughly half the federal budget. That leaves about $500 billion worth of other programs available for deficit reduction before even considering tax hikes.

Moreover, Social Security benefits are certainly "sustainable" for the foreseeable future. In fact, the national pension system has not added one penny to the accumulated national debt. Instead it is contributing an ever-increasing amount to reducing annual deficits. Receipts from the payroll tax will exceed outlays by $19 billion this year, almost $40 billion next year and hundreds of billions in the nineties. Because these surpluses are invested in federal bonds, they reduce the amount the government must borrow from the private sector. This means that this year's deficit would be $19 billion and next year's roughly $40 billion bigger were it not for Social Security.

These arguments seem lost on Social Security critics. They contend that we can't raise taxes because last year's income tax reform "promised" high income people further reductions in income tax rates. But if all bets are off in the scramble to reduce deficits, surely the promises we have been making to all the American people for decades -- promises on which most have based their retirement plans for all their working lives -- should count for at least as much or more.

In the end, most arguments for cutting Social Security reduce to an essentially mindless idea of "fair shares": Since a case can be made against cutting any government program and against raising taxes as well, the only route to deficit reduction is to cut a little bit of everything without respect to merit or moral claim. To bolster their position with regard to Social Security, people who advocate "fair shares" march out allegations meant to prove that it's all right to reduce benefits for retirees, either because they don't really need them or because the retirement system doesn't work very well anyway. These allegations are either incorrect or off the mark. Some of the leading fallacies:

It's all right to cut Social Security because the poverty rate for the elderly is only 12.6% compared to 14% for the population as a whole. Or, in Mr. Peterson's words, they are among the groups "least likely to be poor."

In fact, the lower poverty rate for the elderly is completely accounted for by the fact that the federal government assumes that the old need less food than the young. Even more important is the fact that without Social Security, almost half of all retirees would be living in poverty. Reducing poverty among the elderly is a major national accomplishment in which we should all take great pride. Do we want to make our next great national accomplishment increasing poverty among retirees?

If the elderly as a whole aren't well-off, there are at least some affluent elderly. Why shouldn't we cut back their benefits?

This observation usually leads to the suggestion that we should tax Social Security in the same way that we tax private pension benefits. And that's not a bad idea. (At present only half the benefits of individuals with incomes over $25,000 and couples with incomes over $32,000 are taxed.)But doing so would make only a small contribution to reducing the deficit: about $2-3 billion, if the present income thresholds were maintained. And this scheme raises another question. If we think that the better-off elderly can afford to pay more taxes, why shouldn't we also raise taxes for the better-off non-elderly? The most affluent 20 percent of Americans now receive about half of all national income. This group which has already benefitted most from Reagan era tax cuts is due to receive another bigrate cut in 1988, costing the Treasury an estimated $51 billion over the next three years and much more thereafter. The biggest cuts will go to the very wealthiest people. Would it be amiss to ask Mr. Peterson and his cohort to sacrifice something for the deficit about which they are so vocally concerned?

Why should the elderly be held harmless against cost of living increases, when incomes for the rest of us aren't indexed to keep up with inflation?

Unlike the rest of us, the elderly don't have the option of making up inflation losses by working more hours or seeking better jobs. They're stuck on fixed incomes. Should someone who is 85 receive less income than he did at 65?

It's all right to cut Social Security, because the system will collapse anyway when the baby-boomers retire.

Not true. The 1983 Social Security reforms were designed to maintain its financial soundness for the next 75 years with only modest tax increases. By the time the baby boomers retire they will have built up a trust fund surplus on the order of $2 trillion that they can draw on to help lighten the burden on their children. Beyond 75 years, no one's crystal ball is good enough to support sensible debate.

Social Security promotes consumption not savings, and the United States must increase its savings rate and invest in more physical and human capital.

Pardoxically, critics who use this argument typically also argue for cutting benefits only for the affluent elderly (who are most likely to convert their spare earnings into savings), not for the less affluent (who have no choice but to spend their retirement income). Moreover, these critics generally ignore that Social Security's large and growing surplus promotes private investment by reducing the need for the federal government to borrow thereby freeing up huge amounts of private capital for investment.

Social Security isn't a very efficient way to provide for the elderly, because it's not a means-tested program. Both rich and poor people receive benefits.

What's so great about means-testing? We don't means-test public education or defense or public highways or, in fact, most of the services that government provides, for the very simple reason that they are services that everyone needs, everyone pays for and everyone deserves to receive. The same is true of Social Security. Everyone in our society, whether rich, poor or middle class, has to make provision for their retirement. Social Security is the mechanism by which they use government to do a major part of the job. Why shouldn't rich and middle class Americans (and their parents and kids) benefit from the program, as long as they pay for it? It's their government and their dollars, too.

Social Security is not "welfare for the middle class," as Mr. Peterson and other critics so often maintain. It is a retirement program for everyone. And on efficiency grounds alone, it's a clear winner. It is portable, inflation-adjusted and progressive in its benefits structure (low income workers pay taxes on a larger part of their wages but get back higher rates of return.) The whole system operates with an overhead rate of only 1 percent. Unlike private pensions that often tie workers to their jobs, Social Security facilitates the labor mobility needed for a smooth-functioning economy. And, unlike means-tested programs, that have been eroded by budget cuts and inflation in recent years, Social Security lives up to its promises.

Only the federal government could provide a comprehensive retirement plan with all these advantages. If Americans want to buy this much-needed service from their government -- and don't complain about paying the bill -- what's wrong with that? .

Forrest Chisman is co-author with Alan Pifer of "Government for the People: The Federal Social Role."