CURBING Social Security benefits is both right and inevitable if the administration is to meet its goals of balancing the budget and increasing military spending. Social Security and other primarily middle-class insurance and pension benefits now account for about 60 percent of the non-defense budget. Leaving these programs intact while making further inroads into programs for the poor would produce great hardship and an insupportable imbalance in social priorities.
The administration has focused its cuts on the yet-to-retire. The average person retiring this year at age 65 receives a benefit of more than 50 percent of his previous average earnings. The proposed changes, together with a major reduction already legislated, would phase this replacement rate down to about the 38 percent level that applied before 1972 when Congress enacted an unanticipatedly generous method of adjusting benefits at retirement for past inflation. This proposal has the virtue of spreading the benefit loss fairly over all future retirees and the justification of recouping what was largely an unintended liberalization of benefits. This one change, together with a sensible proposal to curb windfall benefits to federal pensioners, would suffice to put Social Security on a solid footing for the future -- but not for the next few years.
To close the financial gap expected for the next few years, the administration has selected a more dubious strategy. Two groups have been singled out for sharp and abrupt benefit cuts -- the long-term disabled and early retirees. Disability benefits received a needed tightening a legislation passed last year so that both the need for and the impact of the proposed changes may be overstated. The proposed one-third or more cut in beneifts for persons retiring before age 65 will, however, clearly have a large adverse effect. This sudden change in expectations for people nearing retirement not only is bad public policy but will hit on low-income workers -- the group also most affected by the administration's earlier proposal to terminate entirely the minimum Social Security benefit.
In judging all these changes, it is important to remember, however, that Social Security has come to claim so much of the federal budget, not primarily because of congressional mistakes or the workings of a mindless bureaucracy, but because most Americans have come rightly to regard it as the only inflation-proof part of their future retirement income. This insurance has come to cost more than anyone originally expected. The administration has decided that the proper strategy for the future is not to raise taxes but to reduce the size of the commitment. Although some of the specifics of the short-term expediencies now proposed are wrong in principle, the long-run strategy is not. The central place that Social Security holds in this country's social policy does not mean that it is unassailable -- only that it is to be approached with the greatest possible care.