President Reagan's advisory commission on Social Security yesterday recessed for a month without voting on most of the key questions before it.
But leaders did send to the White House and House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) for review one possible compromise for saving the system through both tax increases and benefit cuts.
The compromise, drafted by several key Democrats and never officially discussed by the commission as a whole, has five major parts. It would:
* Move up to 1984 some or all of the Social Security tax increases already scheduled for 1985, 1986 and 1990. The tax rate, now 6.7 percent for both employer and employe, is scheduled under current law to rise to 7.65 percent in 1990.
* Bring new federal employes and employes of nonprofit organizations into the system; federal employes with more than five years of service would remain exempt.
* Defer from July to October the cost-of-living increases given beneficiaries each year.
* Provide for a further tax increase, but not until the year 2020, and then only if needed.
* In that same year, if needed, start lowering the so-called replacement ratio for new recipients -- the ratio of their first benefit checks to their last paychecks.
The plan, put together behind closed doors, was informally outlined to Senate Finance Committee Chairman Robert J. Dole (R-Kan.) and commission chairman Alan Greenspan at private meetings, and Dole said both O'Neill and White House chief of staff James A. Baker III had been informed of its contents. Although some other proposals have been discussed by commission members, this was the only one sent to the White House and O'Neill for their reactions.
Dole said the possible compromise in its existing form relied "too much on increased taxes" for him to endorse it, but called it a "serious effort" to break the impasse over ways to strengthen Social Security's financial position. Basically, Democrats are more inclined to find new revenues to shore up the system and Republicans want it to live within the revenues it has.
The plan, on which neither the White House nor O'Neill had any immediate comment, would raise $150 billion to $200 billion over the next seven years. That is how much the commission has agreed is needed. It also proposed ways to meet the system's predicted long-term deficit.
For the short run, to raise the $150 billion to $200 billion, the plan contained three elements.
One, which a majority of the commission clearly favors but has not yet officially endorsed, would bring under Social Security newly hired federal employes and those with fewer than the five years of service required for vesting in the current federal retirement program, plus all noncovered employes of non-profit organizations.
Federal employes will have to start paying the Medicare part of the Social Security tax next year anyway, thanks to the tax bill Congress passed last summer. This proposal would make new employes start paying the rest of the tax as well.
This proposal, plus postponement of the cost-of-living adjustments each year, would raise about $56 billion through 1989.
The remainder of the $150 billion to $200 billion would come from shifting to 1984 all or part of the tax increases already scheduled for 1985, 1986 and 1990. Dole said there was also discussion of offsetting part of this Social Security tax increase through income tax credits.
For Social Security's long-range deficit, which will come as the baby-boom generation ages and elderly people make up a larger percentage of the population, the plan proposes to raise the payroll tax another half percent each for employers and employes starting in the year 2020. Also in 2020, it would cut the basic benefit that an employe gets in his first Social Security check from roughly 42 percent of his last paycheck to 40 percent. These two changes would take place only if current demographic projections come true and they are needed.
Greenspan, winding up three days of commission voting and discussions, said the next meeting would be on Dec. 10. He indicated that he hoped by then some basic agreements on how to save the system could be reached.
But he said the commission had already reached agreement on a number of key points. It agreed unanimously that the amount needed over the next seven years is $150 billion to $200 billion and that the system needs the equivalent of a 1.8 percent increase in taxes to get through the next 75 years.
It had also agreed that some form of stabilizer, to keep the system's income and costs in tandem in bad economic times, is needed. This may well mean some adjustment in the current formula for granting cost-of-living increases, which are based on prices and in recent years have outstripped the system's ability to pay.
The commission also agreed on the need for a backup mechanism (such as automatic benefit cuts, tax increases or authority to borrow from the Treasury) in case of an unanticipated short-term crisis.