When President Reagan proposed huge cuts in Social Security a year ago, Democrats attacked him on the grounds that he was proposing more than needed to keep the world's largest check-writing system solvent.
They said he was trying to balance the federal budget on the backs of the poor, and that the Social Security problem could be solved simply by allowing the troubled old-age insurance fund to borrow from the better-off Medicare fund. They blocked his proposals and turned them into a major political liability for the president. News Analysis News Analysis
Now the Republicans, as part of the new Reagan federal budget, are again suggesting cuts, totaling $40 billion over three years, in the name of "Social Security solvency," prompting new Democratic attacks.
But in contrast to last year, everyone now agrees that the immediate Social Security problem can be solved only by some retrenchments or some new source of revenue. Shuffling money between the funds won't do the job.
In the past year the economy has worsened and the Medicare trust fund has turned out to have less surplus to borrow from than forecast 12 months ago. As a result, there is universal agreement that unless something is done, the old-age trust fund in a year or so (perhaps a bit later if conditions are good) simply won't have enough money to pay full monthly benefits to more than 30 million people on the old-age and survivor rolls.
Sen. Daniel Patrick Moynihan (D-N.Y.), one of the president's most vocal critics, no longer asserts that interfund borrowing alone can handle the problem, and House Aging Committee Chairman Claude Pepper (D-Fla.) is so concerned that he has introduced legislation to pump general tax revenues into the Medicare trust fund and shift Social Security taxes previously earmarked for Medicare to the old-age fund.
The real issue now before the nation is precisely how to tackle the problem: by cuts or by new revenues?
Both Reagan and Senate Budget Committee Republicans, in endorsing the budget compromise this week, made it pretty clear they think the only way to strengthen the system--in view of the condition of the economy, public dislike of tax increases and the size of the federal deficit--is to start pruning benefits, and the $40 billion probably would be only the first installment.
On the other side of the argument are Pepper, Moynihan, former Social Security commissioner Robert Ball and a long list of Democrats.
Ball, in an interview, argued that you don't need to cut benefits to save the system. The current funding shortfall, he said, is only temporary; it will last through the rest of the decade but then new taxes, already scheduled, will kick into place in 1985 and 1990 and start pulling the old-age fund back to solvency.
In addition, favorable demographic factors predicted for the 1990s will help the income-outgo balance. During this period the ratio of workers to retirees will be high because the baby boom generation will be paying into the system to support the Depression-era retirees, which are a smaller group.
The result: the combined old-age and disability funds (the latter is a smaller fund experiencing no troubles) will start rising rapidly in the early 1990s and will have a balance of nearly double a full year's benefits by 2010 and stay in good shape till past 2025.
Given that the immediate problem is temporary, Ball said, many solutions are possible without long-range cuts: borrow from the Treasury and repay during the flush period; advance the tax increases already scheduled for 1985 and 1990 by a year each; expand coverage to some groups not covered now which would boost financing overall; put some Treasury general revenues into Medicare.
Although Pepper acknowledges the system's troubles, he said yesterday the $40 billion cut wasn't put into the new budget to save the system but to make the federal budget deficit overall look smaller. Other Democrats said that they are not even certain the system would need as much as $40 billion to get through the next few years.
A Gallup poll conducted for the U.S. Chamber of Commerce suggests that some Social Security cuts might not be as politically dangerous as many people think: the poll concluded that 33 percent of Americans would not be influenced much in their voting by whether a candidate voted for a one-year freeze in cost-of-living adjustments to Social Security, 26 percent would be more more likely to vote for such a candidate and 33 percent more likely to vote against him.