This year, Democrats and Republicans are linking the "fairness" issue to Social Security. It could be one of Congress's longest running debates.

In the Senate, the debate was kicked off by Sen. Daniel Patrick Moynihan (D-N.Y.) and Majority Leader George J. Mitchell (D-Maine). Moynihan proposed to cut the Social Security payroll tax rate as a boon to low- and middle-income workers, whose wages after inflation and paying Social Security taxes, he says, have hardly gone up in recent decades.

He called the current rate excessive because, at least for the next 25 years, until the bulk of the big Baby Boom generation is in retirement, it is raising far more money than needed to pay benefits.

Moynihan has argued that the annual Social Security surpluses, which the Treasury borrows and uses for whatever purposes it needs cash for, are so large that the Bush administration is using them to help run the general day-to-day operations of the government, for which they were never intended, while refusing to propose taxes needed to close the day-to-day government deficit.

The second major Social Security change was proposed by Rep. Dennis J. Hastert (R-Ill.) and sponsored by 219 other House members, about a third of them Democrats.

The Hastert plan would allow Social Security recipients 65 or over to earn as much as they want from a job without any reduction of benefits.

Under existing law, a Social Security retiree from 65 through 69 can earn up to $9,720 without loss of benefits. For each $3 above that, benefits are reduced by $1. For those 70 and over, there are no limits; for those under 65, there are different limits that would not be removed by the Hastert bill. About 1 million people ages 65-69 would benefit from the Hastert bill.

Hastert called the earnings limit, which is actually a test of whether a person is retired, an unfair "Depression-era relic that discriminates against senior citizens who wish to work after they reach retirement age."

The Bush administration opposes both ideas, and a good number of congressional Democrats and economists express reservations. As Henry Aaron, an economist at the Brookings Institution, put it, "The last thing in the world a country with a $300 billion-a-year deficit needs is a tax cut of $160 billion over five years."

Although technically the Social Security surpluses are no longer figured into some of the government's deficit calculations, economists include them in their assessments.

"Boosting the deficit forces the government, by borrowing, to siphon off even more private funds, cutting into the amount of investment in the private economy," Aaron said. "If we are not able to maintain private investment, the economy will grow more slowly."

Others argue that the combined reserve in the Social Security old-age and and disability trust funds has not reached a safe level -- one to two year's benefit payments -- necessary to avoid insolvency in case of back-to-back recessions.

Rep. Willis D. "Bill" Gradison Jr. (R-Ohio) called the Moynihan plan "bad economic policy because it will reduce national savings." Social Security Commissioner Gwendolyn King also cited the need for a substantial reserve.

The same arguments are applied by several critics to the Hastert proposal, which would cost the trust funds about $5 billion a year. Opponents of the Hastert plan point out that most of the turned-back money would go to people who are at the upper-income level, with average family income of $56,000 a year.

Many congressional Democrats, including Finance Committee Chairman Lloyd Bentsen (D-Tex.), have favored a substantial increase in the earnings limit, but not abolition. The administration has proposed increasing the earnings limit to $11,000 in 1992 and 1993, which would only cost about $250 million over five years.

Moynihan, who introduced his proposal Jan. 14, got a big boost from Mitchell, who endorsed the general concept Feb. 6 as being in the interests of tax fairness, an issue that has proved a powerful political weapon for Democrats. "We should proceed to engage in payroll tax reduction," Mitchell said.

But House Speaker Thomas S. Foley (D-Wash.) has appeared lukewarm to the idea. "I have had reservations about it, principally concerned about the impact on the system. The other question is, where are you making up the revenue? It is a very, very substantial revenue loss."

He said the loss of revenue would be more than $160 billion over five years, which, it turns out, would be almost exactly the same amount Democrats finally succeeded in getting the Bush administration to accept in general tax increases last year.

Moynihan, however, argued that "it's about time the American worker got a break."

A variant of the Moynihan plan being studied by some members of Congress, including some top-level House Democrats, would lower the Social Security tax rate, but raise the taxable wage high enough to make up for any revenue loss -- perhaps to $125,000 or more. The plan, derived from a proposal developed by the Progressive Policy Institute, is aimed at "tax fairness" but without loss of federal revenue.

The plan was denounced last week by former Social Security commissioner Robert M. Ball, who also opposes the Moynihan plan, and former Social Security chief actuary Robert J. Myers.

In a statement, Myers and Ball said while such a plan would "shift more of the financial burden from lower earners to higher earners and yet maintain the total income of the program," it could undermine the "nearly universal support" Social Security enjoys.

Support could crumble, they said, because benefit formulas would become distorted. For example, high-income earners would receive such a low return on what they put in that they would be alienated.

Moynihan, in introducing his plan, said that as a result of the 1983 Social Security rescue package, the system is raising far more money than would be needed now under the previously used pay-as-you-go concept -- $74 billion extra this year, rising to $225 billion by the year 2000.

The "tax structure of the United States is fast becoming one of the most regresssive of any Western nation," Moynihan said. "Last year, the Social Security Adminstration estimated that in 1990 about 74 percent of taxpayers would pay more in {Social Security} taxes -- including the employer's share -- than in income taxes."

The current Social Security tax for old-age and disability benefits is 6.2 percent, levied on the first $53,400 of wages. The rate is fixed in law, although Myers, from whom Moynihan got the idea of cutting the tax rate, says the rate will have to rise to about 8.1 percent in the 2040s to meet the needs of Baby Boomers.

Although all wage and salary workers pay the same rate, the impact is regressive, because of the $53,400 limit {which rises slightly each year}. For example, a $10,000 earner pays 6.2 percent, or $620. But a $100,000 earner pays 6.2 percent of the first $53,400, which is $3,310.80, or 3.3 percent of his actual wages.

Moynihan wants to cut the rate to 5.7 percent through 1993, 5.5 percent in 1994-95 and 5.2 percent in 1996. In 2010, it would rise to 5.6 percent, go back to 6.2 percent in 2015, then rise in steps to 8.1 percent in 2050.

Moynihan would also raise the wage base a bit more than under current law, so that it would reach $82,200 in 1996, instead of the $69,300 now set in law for that year.

As a result, trust fund revenues would be cut by $162 billion over the next five years.

Myers said the Moynihan bill would leave the system just as well fixed to meet the demands of the Baby Boom generation as current law. He said he fears the appearance of a tremendous surplus now is dangerous because it may induce people to demand far higher benefits than the system can sustain later.

Ball, a frequent adviser to leading Democrats, opposes the Moynihan plan, saying he thinks the Social Security trust fund should have at least 1 1/2 year's reserve, which will not occur until 1995. In addition, he said, "From an overall economic and budget point of view, it is a bad time to be reducing revenue."