Democratic senators said yesterday the Reagan administration is exaggerating Social Security's problems and demanding much larger benefit cuts than necessary in an effort to balance the entire federal budget at Social Security's expense.
As the Social Security subcommittee opened hearings on the touchy question of how to shore up the program, Sen. Daniel Patrick Moynihan (D-N.Y.) described the administration's tactic as "political terrorism."
The purpose, Moynihan said, is to enable President Reagan to carry out his promise to balance the budget by fiscal 1984.
"They come in shouting 'Crisis! Crisis! Bankrupt! Bankrupt!'," said Moynihan, yet Social Securtiy is basically a "sound system" that needs far less adjustment than the administration demands.
"That is completely false, absolutely false," Secretary of Health and Human Services Richard S. Schweiker shot back angrily.
Schweiker readily conceded that the administration is using "worst case" inflation and unemployment projections in calculating how much must be cut to put the system in balance.On that basis it has asked for program changes that could save $111 billion over the next five years while at the same time the Reagan administration is officially projecting a much more favorable economic scenario for the rest of the government.
If the more favorable economy is the one that actually develops, Social Security old age and disability funds combined, which would otherwise run short in 1982 and for several ensuing years, would need only about $10 billion more through 1986 to get over the crisis provided they could borrow from the presently flush Medicare fund.
And in the longer run, even if the economy doesn't perform quite up to Reagan's optimistic scenario over the next 75 years the old age and disability funds would need only about half the cuts that Reagan has asked.
Schweiker said repeatedly that the reason for using "worst case" assumptions as the basis for planning, and for seeking the large long-run cuts, is to provide an absolutely rock-ribbed "adequate margin of safety just in case unfavorable economic circumstances should arise."
He said, "The prudent course is to prepare for the worst while striving to adopt policies which produce the best."
The benefit cuts proposed by the administration, which so far have received rather unfavorable responses from both parties, include an 8 percent to 10 percent cut in basic benefits for future retirees, further reductions for those who retire in the future before age 65, and new restrictions on disability benefits.
Sen. William Armstrong (R-Colo.), chairman of the subcommittee, and Bob Dole (R-Kan.), chairman of the parent Finance Committee, pledged to put the system back in good shape. Both opposed doing so by increasing Social Security taxes beyond what is already scheduled or by using income tax revenues.
Armstrong said using general revenues "is like asking Amtrak to bail out Conrail."
Schweiker said that because of the economy's poor performance over the past several years, the old-age fund, largest of the three, will be unable to meet all payments sometime late in 1982, regardless of economic conditions. And even if it could borrow from the disability and Medicare funds, both of which have nice balances right now, a crisis would be postponed only two or three years except under the most favorable economic developments, leaving 36 million beneficiaries out in the cold.
Bill Bradley (D-N.J.) and Max Baucus (D-Mont.) joined Moynihan in attacking what Bradley called the administration's "two sets of books," one justifying an income tax cut and the other, Baucus chimed in, justifying Social Security cuts large enough "to help balance the budget in 1984."
But Schweiker said these were necessary to stop a "hemorrhage" in the fund.