BY PROPOSING substantial reductions in Social Security retirement and disability benefits, the administration has opened its economic strategy to attack from another quarter. The plan not only alarms a broad sector of the public, including a powerful part of the administration's constituency, but also reveals the signs of stress that come from trying to reconcile prudent budget policy with an unrealistically optimistic economic forecast.
In the long run, which for Social Security means the next 75 years, the administration proposes a considerable cut in benefits for all future retirees. (The amount of that reduction, incidentally, is about a fourth of benefits now payable, not a third, as we calculated yesterday.) In the short run, the proposals, including those submitted earlier, are estimated by the administration to reduce benefits by about $70 billion over the next five years -- an amount far in excess of the cumulative $11 billion retirement and disability fund deficit implied by its forecast.
To achieve this reduction while holding fast to its campaign promise not to harm current beneficiaries, the administration would deal some very harsh medicine to some very vulnerable groups -- early retirees, persons with severe but not necessarily permanent disabilities and poor people now relying on the minimum Social Security benefit.
Since the administration, by its own forecast, needs to deal with a Social Security deficit that is only a fraction of its proposed cuts, this strategy leaves it open to one of two charges. Either, as some claim, it is trying to use a surplus of payroll taxes to cover deficits elsewhere in the budget, or it doesn't really believe its own forecast.
Chairman J. J. Pickle of the House Social Security subcommittee is one who doesn't believe that forecast. He thinks the five-year deficit will be closer to $100 billion because of higher inflation and unemployment, a contingency he proposes to meet primarily by transferring funds from the now solvent Medicare fund and replacing them in the future out of general taxes. The House subcommittee has, however, shied away from two other important alternatives. One, long overdue, is covering federal employees under Social Security. The other is to correct the overindexing of Social Security benefits, which has swelled costs in recent years.
Although the Senate retreated from its position in conference with the House yesterday, it voted last week to deal with the indexing situation by limiting future cost-of-living adjustments to wage increases or price increases, whichever are smaller. This approach would raise questions of fairness in the long run as well as the serious technical problem of constructing an appropriate wage index, but it is not a bad stopgap measure. The president, however, apparently feels committed to protecting those now on the rolls from all but the most modest adjustment. This leaves him no alternative but to focus the full force of his cuts on a few fringe groups and those not yet retired.
Fairness requires that, if sacrifices are needed, they should be spread across all Social Security beneficiaries, not concentrated on a vulnerable few. This means that, whatever the reluctance of the administration, Congress must take on the job of revising the method of indexing benefits. The administration may feel bound by its campaign promises, but Congress has no such obligation.