The Threat to Social Security

...9. Exclusion of Social Security payroll contributions and expenditures from the Federal Unified Budget...

...eliminating benefits for children of retired workers aged 62-64...

...I doubt that it wants the system mixed up with economists' theories, whether supply-side or otherwise...

...His suggested reforms for preserving "the integrity of the Social Security Trust Fund and the basic benefit structure that protects older Americans," however, are not consistent with his rhetoric...

...2. Authorization to borrow, with interest, from the general fund for limited periods...

...taking into account a pension being received from previous employment not covered by Social Security...

...And that is the highest priority, the most urgent necessity, at the present time if we are to preserve the character and intent of this invaluable national institution...

...Since it was the abrupt introduction of such a change that most rankled, Schweiker is already talking of a phase-in compromise...

...For as the President also made clear in his letter, he intends to continue pressing the "series of Administration proposals that we believe are sound, sensible solutions both in the short and long term...

...It is too big a risk to persuade contributors that their entitlements could be wiped out by a Congress that did not take into account the moral, political and economic commitments they believe are embodied in the system...

...His poorly planned and badly executed assault last month on Social Security having run into strong opposition, President Reagan beat a hasty tactical retreat...

...Designed mainly to help middle- and upper-income craftsmen, professionals and executives, this fulfills a promise the President made during the campaign...

...The Reagan cutbacks would necessarily reinforce and extend this doubt...

...and the House Ways and Means Subcommittee on Social Security, chaired by Representative Jake J. Pickle (D.-Tex...

...As Assistant Secretary for Legislation in the Department of Health, Education and Welfare under President Kennedy, he was responsible for handling several landmark education acts as well as Medicare and Medicaid...

...It is estimated that the last, over a 10-year span beginning in 1987, would cost someone earning the Federal minimum wage at retirement $3,564 in benefits...

...Secretary Sch weiker, in presenting the Reagan proposals, said: "We will stand by the traditional retirement age of 65...

...7. Extension of coverage to all Federal employees...

...But it would be a mistake to assume that the threat to the national retirement scheme-much expanded since the passage of the original enabling legislation in 1935-has been thwarted...

...The Reagan reforms also include advancing the date of the annual cost-of-living increase from June to September...

...Then, on May 12, Secretary Schweiker unveiled 12 specific proposals providing a further $52.9 billion in cutbacks over the same five-year period...

...There is a natural tension between the economic requirements of younger and older persons, and also a community of interest...

...The two other changes would increase the waiting period from five months to six, and require a prognosis that the disability will last at least 24 months instead of the current 12 months...

...It would increase disbursements $6.5 billion during 1982-86, and raise the long-range cost of the system 0.14 per cent of payrolls...

...3. Re-enactment of the Vandenberg amendment (1944-50), which allowed appropriations from the general fund to assure full payment of promised benefits...

...In my opinion, there would be no support for Social Security payroll taxes if the benefits were not defined and ultimately paid as a matter of statutory right...

...WHAT TO DO ABOUT IT The Threat to Social Security WILBUR J. COHEN Wilbur J. Cohen began his career in Washington in 1934 as research assistant to the Executive Director of President Roosevelt's Cabinet Committee on Economic Security, which drafted the original Social Security Act, and then joined the staff of the Social Security Board...

...The non-medical elements are especially important to older workers, who would be deprived of benefits under the proposal...

...if not, Schweiker conceded, the "worse case" reduction would be $104.4 billion...

...and, of widest impact, altering the formula for calculating the benefits of everyone who stops working at age 65 or later...

...Moreover, if the confidence of large sectors of the public in the system is weakened or destroyed, its entire contributory structure could very well be undermined...

...Cohen is also the author of numerous articles and books in the fields or Social Security, unemployment Insurance, welfare reform, national health, social services, and education, including Retirement Policies Under Social Security...

...And the thrust of the proposals, in addition to violating the President's promise, would break the promises made by 20-odd Congresses and seven past Presidents from both parties to those who have paid in earmarked contributions to the system over the past 43 years...

...In all, $88.4 billion of benefits would be clipped away, if the economic assumptions of the Reagan budget prove correct...

...Establishment of a special Social Security Court (similar to the Tax Court) to handle the growing number of benefit appeals...

...5. A specified tax credit for employer, employee and self-employed contributions, with the credit to be considered part of the 1981 tax reduction package...

...The Administration would require 30 quarters of coverage (seven and a half years...

...Public hearings on confronting the system's present problems are being held by the Senate Finance Committee, chaired by Senator Robert Dole (R.-Kan...

...Recent public opinion polls show that most Americans look upon Social Security as did conservative Republican Senator Robert A. Taft of Ohio?that is, as an exception to the general tax or government assistance policies...

...Failure to meet the income and medical care needs of the old and disabled would eventually result in higher welfare costs to the young...

...The Reagan effort to revamp the Social Security System has beenatwo-stageaffair...

...Of the reforms set forth May 12, the one that drew immediate fire sought to reduce the benefit rate for workers retiring between the ages of 62-65 from 80 per cent to 55 per cent of their full entitlement (and from 40 per cent to 27 per cent for spouses), starting next January 1. Within a week, by a vote of 96-0, the Republican-controlled Senate passed a "sense of Congress" resolution opposing any move that would "precipitously and unfairly penalize early retirees...

...He is the only person who has been Assistant Secretary, Under Secretary and Secretary-in President Johnson's Administration-of HEW...

...But recent Social Security Administration studies show that only 15-20 per cent of the workers who opt for early retirement do so voluntarily...

...Lifting the earnings limit would please the National Association of Retired Persons, the National Retired Teachers Association and work-ethic advocates, but would do almost nothing for the low-income earners, women and minorities who would have their benefits reduced by the rest of the Reagan package...

...This would make it impossible for many individuals who have a declining health condition (and especially women) to secure benefits altogether...

...Consistent with supply-side economics, the Reagan program envisions a 3 per cent lowering of Social Security payroll taxes...

...In the second instance, the Administration did not seek any major change in computing the annual Social Security cost-of-living adjustment, as urged by most economists and a variety of newspapers...

...Conversely, major changes in benefits could undo support for the contributory approach at the heart of the present law...

...This proposal has been put forward primarily by economists and a majority of three different advisory groups, with labor and liberal dissents...

...applying the 150 per cent family benefit maximum in disability to death and retirement cases...

...Reducing the benefits of the aged, and the payroll tax on employers and younger persons, as the President proposes, would have the unfortunate consequence of widening that gap...

...someone earning the national average income, $3,252...

...In time, the program would have to be converted into a welfare system wholly financed from general revenues, with an income test...

...At present, an individual is eligible for disability benefits if he/she has been contributing to the system for 20 out of the last 40 quarters (roughly five years out of the last 10...

...In my judgment, these actions taken together would re-establish public confidence in the financial and administrative integrity of the Social Security System...

...In 1978 President Carter appointed him Chairman of the National Commission on Unemployment Compensation, and he is at present a member of the Federal Advisory Council on Unemployment Insurance...

...One hopes that will remain the case...

...The entitlement to these benefits is a compact the elected representatives of the people have written into a law similar to the policy an individual receives from a private insurance company...

...The millions of people who have contributed to this insurance system for many years have done so believing it would pay them the stipulated benefits as a matter of legal right...

...From 1969-78 he was the Dean of the School of Education and Professor of Education and Public Affairs at The University of Michigan...

...Among the remaining reductions the Administration is still pursuing, perhaps the most callous are the four that would decrease benefits for the disabled by a total of $21.9 billion during 1982-86...

...The figures do not include amounts where the retired person has a spouse...

...Born in Milwaukee in 1913, Cohen received his degree in Economics from the University of Wisconsin...

...During the campaign and in presenting his budget, the President promised to keep Social Security intact as part of his "safety net...

...Only one Reagan proposal would increase expenditures-by raising the amount an individual may earn at age 65 without losing any benefits to $ 10,000 in 1983, $15,000 in 1984, $20,000 in 1985, and an unlimited sum thereafter...

...Here a sensible compromise would be balancing the cut in payroll taxes with the addition of Federal general revenues...

...we will not raise it...

...Virtually no consultations were held with labor groups, governors, private pension experts, or key personnel in the Social Security Administration...

...A second change would restrict the definition of disability solely to medical causes...

...It is a sensitive, delicate balancing of the consumption and savings-for-the-future needs of younger persons, and the fear of dependency when old age, disability, medical expenses, or death occur...

...Although its objective in Constitutional terms is to promote the general welfare, Social Security, one apparently must stress, is not a welfare program...

...The most restrictive change here would make it tougher to qualify for benefits...

...He has since held many posts in the capital...

...8. Re-establishment of a nonpartisan, independent Social Security Board, and separation of its functions from the Department of Health and Human Services...

...Unlike most economists, the public does not view Social Security as a mac-roeconomic income transfer program...

...It contented itself merely with recommending that the payment date be moved from June to September, since the fiscal year now begins in October rather than July...

...Currently, he Is the Sid W. Richardson Professor of Public Affairs at the Lyndon B. Johnson School of Public Affairs at the University of Texas in Austin...

...Reacting to the sharp criticism of the Reagan reforms, Secretary Schweiker said before the House Subcommittee on May 28 that the Administration was " willing to look at anything," while carefully conceding nothing...

...Reduction or repeal of a statutory promise could well result in many citizens losing faith in the integrity of the Congress and their government...

...In the first instance, it rejected the proposal to increase the Social Security retirement age for full benefits from 65 to 68...

...Already many young people doubt they will ever collect what the law now provides...

...Consequently, 80-85 per cent of those hitbyacutbackinthis area would be individuals who are simply physically or mentally incapable of continuing to handle a job...

...Social Security is one of the ways we bridge the intergenerational gap...

...and someone earning the maximum amount on which Social Security must be paid, $9,900...

...Social Security is an intergenerational income transfer agreement...

...As a practical, constructive alternative to an approach that tears at the fabric and spirit of the Social Security System, I would suggest the following: 1. Authorization to borrow among the four separate Social Security trust funds...

...Initially, the Administration put forward a plan to trim the minimum benefit and eliminate some others, for a $35.5 billion reduction in payments during the calendar years 1982-86...

...This still would reduce benefits $6.5 billion in 1982-86, but pressure to revise the computation method persists and Schweiker has indicated the Administration would go along if Congress insisted...

...Nor should the financing and benefit aspects of the program be based solely or primarily on short-run budgetary or fiscal considerations...

...4. Payment of up to one-half of the cost of the Medicare program from general revenues, and allocation of the released payroll contributions to the Old Age, Survivors and Disability Insurance program, with the cost to be considered part of the 1981 tax reduction package...

...This might lead eventually to "tripartite" financing, drawing equal shares from employers, employees and general revenues...

...The Administration deserves credit, however, for two acts of omission...

...Under existing law, one can qualify on a combination of medical and age, education and work experience factors...

...In a letter to six legislators he belatedly asked that Congress "launch a bipartisan effort" to deal with the urgent problem of adequate financing facing the system...

...6. Extension of coverage to members of Congress and persons confirmed by the Senate, including the Commissioner of Social Security...

...It is a social insurance program with designated payroll taxes to support specific statutory benefits...

...They also would drive a further wedge between the generations...

...Largely the work of Budget Director David A. Stockman and Secretary of Health and Human Services Richard S. Schweiker, they were hastily drawn up...