SOCIAL SECURITY is so important to the well-being of millions of Americans that it is difficult to view calmly any threat to its financial stability. But the problems highlighted last week by the Social Security trustees are really not cause for major alarm. They can and should be fixed quickly and easily by a technical change in the way revenue is allocated among the retirement, disability and Medicare trust funds within Social Security.
That we should be in this short-run difficulty at all, after the assurances all around that the 1977 amendments had secured the health of the trust funds, is baffling to many. It is an unfortunate result of the now painfully obvious fact that the economy in the past few years has been operating in strange and unpredictable ways. The 1977 calculations about how much revenue would go into Social Security and how much would be needed to pay benefits were based on decades of experience. They were also, as it turns out, wrong. During the inflation fever that gripped the country until this spring, contrary to all previous experience prices rose much more rapidly than wages. Wages determine how much gets paid into the fund and, because benefits are indexed to the Consumer Price Index, prices determine the benefits paid out. Obviously, the number of people working and the number receiving benefits also affect the totals going in and out, so the recent rise in unemployment hasn't helped.
When the 1977 amendments were enacted, it was clear that the reserves in the Social Security trust funds would continue to decline until the 1981 payroll-tax increase began pumping money into the system faster than it was going out. Other increases are also slated for 1985 and 1990, to deal both with inflation and with the growing proportion of the population that will then be of retirement age. It was, it may be recalled, a difficult thing to get those tax increases enacted, and it is not surprising that the amendment's sponsors did not want to burden it with additional immediate tax increases that they could not be sure were really needed. Fortunately, it is now only the allocation of funds within Social Security among old-age, disability and Medicare that is off; borrowing between the categories should enable the system to weather the immediate storm. Given that the country has entered a period so far somewhat badly charted by economic forecasters, however, people might be wise to arm themselves psychologically for more surprises of the sort delivered last week. The important thing is to maintain steadfast support of the Social Security system, and work these problems through as they arise.