The Carter administration's plan for shoring up the Social Security system ran into a wall of skepticism yesterday at a hearing of a House Ways and Means subcommittee.
It was denounced as a dangerous drain on the Treasury and a potential cause of higher unemployment by hostile congressmen of both parties.
The result was to increase doubts that the administration proposal will get very far in Congress this year even though deficits in the Social Security trust funds have occurred in the past three years and two of the funds may be exhausted within a few years.
The criticism centered on the administration's plan to tap general tax revenues for $14 billion to shore up reserves. Although the administration described it as a temporary measure several subcommittee members cautioned that it might become permanent. Ways and Means Committee Chairman Al Ullman (D-Ore.) said, "If we think that we can pay for Social Security costs out of general revenues, we are deluding ourselves."
The subcommittee chairman, Rep. James A. Burke (D-Mass.), began the hearing by saying the administration's plan was "a step in the right direction." But by the afternoon he was saying he would press as an alternative a new financing system he has long advocated that would draw a third of the costs from employers a third from employees and a third from general revenues.
Republicans also jumped on another part of the proposal that would place a large share of the additional costs on employers. They charged that would cause many employers to cut back on hiring new workers leading to higher unemployment.
Secretary of Health, Education and Welfare Joseph A. Califano Jr. defended both tactics as the only way of preventing workers from being saddled with the rising costs of Social Security.
General revenues would be tapped, he said, only so long as the unemployment rate is above 6 per cent. When economic conditions are bad, he said, the government has a responsibility to take over part of the burden instead of shifting it to low- and middle-income workers through the payroll tax, the traditional tol for raising Social Security revenues.
The administration's plan has now been denounced by some leading Republicans and the U.S. Chamber of Commerce, and defended by the AFL-CIO. Sen. Russell B. Long (D-La.), chairman of the Senate Finance Committee, called the proposal a step in the right direction but said that while the Senate is likely "to vote to do much of what the President is recommending . . . we may find ways to improve on his recommendations."
The principal opponent, however, appeared to be Ullman, who criticized the plan at length during the hearing and in a meeting with reporters later.
He said he agreed that "we've gone about as far as we can go with payroll taxes" but suggested that something other than general revenue funds be used to make yp for the deficits.
"We have a whole gamut of taxes on consumption we can use instead of income taxes," he said. "But you just can't continue loading everything onto income taxes." Pressed to cite an example of a consumption tax that could be used, he said revenues from the proposed energy taxes in Carter's proposals "are a possibility."
Carter apparently considered using some tax revenues from his energy proposals. Rep. Henry S. Reuss (D-Wis.) said he asked Carter during a White House meeting last Wednesday if the energy taxes might be diverted to shore up Social Security. Reuss quoted Carter as saying that possibility had been considered until two or three days previously but was rejected.
Ullman suggested that the short-range Social Security problems be solved by the conventional means of raising the payroll tax rate and wage base. Long-term solutions should be put off until next year, he said.
Some subcommittee members said they feared that the supposedly temporary reliance on general revenues could become permanent if the unemployment rate remains high. Rep. Joe D. Waggoner Jr. (D-La.) called the administration's hopes of reducing unemployment "horseback guesses and gimmicks."
"It seems to me that we are involving ourselves in a welfare manner and that's what worries me," he said.