Securing Social Security

...5. Self-employment rate...

...These reductions totaled $25 billion over a five-year period...

...The agreement would improve the lot of the very poor, too...

...Mary Fuller, Greenspan, and Senator John Heinz (R.-Pa...

...None of the Congressional sponsors of the bipartisan plan have indicated enthusiasm for these options, and President Reagan has stated he is against more levies...

...Adding two public members to the Board of Trustees of the Social Security funds, and altering investment procedures to enable the funds to earn a slightly higher average rate of interest, seem eminently worthwhile suggestions as well...

...Yet late last January 15, much to the surprise of commentators in the press and on television, 12 of the 15 Commission members approved a multifaceted plan with the concurrence of President Reagan, Speaker of the House Tip O'Neill (D.-Mass...

...raise benefits of disabled widows and widowers who applied early to the level payable to all widows and widowers at age 60...

...Ten of them are changes that would result in a net "savings" (increased income or decreased expenditures) of $168 billion over the seven years 1983-89...

...This would raise the 1984 rate for both employer and employee from 6.7 to 7 per cent, but give employees a refundable tax credit in '84 to offset the up-page...

...The Commission rejected making the system voluntary, or establishing separate "welfare" and "contributory" benefits...

...A minority—including Pepper, Senator Daniel P. Moynihan (D-N.Y...

...Indeed, a significant accomplishment of the Commission plan is that it includes no structural change in a statutory benefit...

...The 9.35 per cent self-employment Social Security tax rate would be made equal to the combined employer-employee rate of 13.4 per cent, but one-half of the higher amount could be deducted as a business expense from Federal income taxes...

...Starting in 1988, if the Social Security fund fell below 20 per cent of estimated outgo for the year, the lesser of price or wage increases would be paid as the cola...

...or institute various other excise...

...The Commission agreed that an additional 1.8 per cent of taxable payroll income was necessary to prudently finance benefits until 2056 (or over the 75-year period for which actuarial estimates are prepared...

...The Commission did urge that Social Security—originally administered by an independent board—be separated from the Department of Health and Human Services...

...The Commission's recommendations seek to assure the system's continued short-range (1983-89) and intermediate-range (1990-2010) financial Wilbur J. Cohen, who served as Secretary of Health, Education and Welfare under President Johnson, is currently Sid W. Richardson Professor of Public Affairs at the University of Texas...

...A long-term improvement, to be phased in from 1990-2010, would gradually increase the present delayed retirement bonus from 3 to 8 per cent a year for those who work between ages 65 and 70...

...More specifically, I think that thanks to the Commission's efforts, Congress will this year return Social Security to a sound financial basis and reaffirm its role as a permanent basic floor of protection...

...6. Military credit...

...Some have objected that the proposal is a repudiation of a Congressional promise...

...9. "Automatic stabilizer...

...Young people are relieved from the major financial responsibility of providing for their parents and grandparents, as was true prior to the establishment of Social Security...

...Despite the bipartisan agreement and the legislation it is likely to produce, my guess is that Social Security will be an issue in the 1984 campaign...

...Continuing a practice first authorized from 1982-83, this would permit borrowing from the Medicare fund and repayments with interest until 1987...

...Representative Pepper argued hard and long to have this item removed, or at least cut back to three months...

...solvency...

...Then, on May 12,1981, in the faceof heightened anxiety about the system's future, the President precipitately sent to Congress an additional 12-part package designed to cut promised Social Security benefits by $213 billion during the years 1982-90...

...In any event, the organized campaign to peg retirement at 68 appears to have been deflated, although those who settled on 66 did also recommend indexing to advances in life expectancy...

...Like the AARP, the Gray Panthers have voiced strong opposition to taxing part of Social Security, yet under the terms outlined only about 11 per cent of benefit recipients would be affected...

...None of this is to minimize the value of the Commission...

...The bipartisan plan does not resolve Social Security's long-range financial problems—that is, beyond the year 2015...

...and Representative William Archer (R.-Tex...

...They have received the support of several independent business groups that are against accelerating payroll taxes...

...Soon after taking over at the White House, as part of the Omnibus Budget Reconciliation Act of 1981, he succeeded in obtaining repeal of the minimum Social Security benefit of $122 a month...

...It is not expected that this provision would actually become operative...

...As for raising the Social Security tax rates, I think all participants in the system still receive a fair return...

...and cutbacks in Medicare...

...Since Republicans named two-thirds of the group, the odds appeared to be stacked against any approach that might be acceptable to its Democratic-liberal-labor contingent...

...Instead, the AARP wants to postpone the 10 per cent income tax cut scheduled for July 1983 (worth $27 billion a year...

...It is estimated that putting the cola on a calendar year basis would reduce disbursements by $40 billion for the seven years...

...Another sensible Commission recommendation would remove Social Security income and outgo from the Federal Unified Budget...

...The expected $30 billion yield would be credited to the Social Security system...

...Rates would then go to 7.05 per cent in '85 and 7.15 per cent in '86, as previously planned, take an unscheduled jump to 7.51 per cent in '88, and move in 1990 to the already mandated 7.65 per cent...

...Actually, the removal of Social Security benefits from Federal income taxation was an administrative decision of the Internal Revenue Service in 1940, rather than a specific statutory exclusion...

...They also are the heart of the formula that enabled liberals and conservatives, business and labor, Democrats and Republicans, to arrive at an unexpected agreement...

...It is not, however, a panacea...

...President Reagan and his supporters cannot easily escape the fact that he cut out some benefits in 1981 and then proposed drastic further cuts for 1982...

...When the fund again reached 20 per cent, the Consumer Price Index would once more be the yardstick, and after the fund ratio reached 32 per cent, additional benefits would be paid to make up any prior loss...

...On the contrary, from the stand point of the nation, business and the economy generally, it should be noted that Congressional acceptance of the agreement would result in a lowering of the deficit in the Federal Unified Budget by approximately $110130 billion during 1983-89, depending on business conditions...

...These steps would yield $23 billion...

...It quickly won the support of key Capitol Hill legislators on both sides of the aisle as well...

...One-half of Social Security benefits would be added to adjusted gross income of taxpayers with other income of $20,000 or more for a single taxpayer, or of $25,000 or more for joint returns...

...As a former Secretary of the Department, I wholeheartedly concur...

...Many individuals are confused when Social Security taxes or benefits are cited as increases or decreases in the government "deficit...

...For several years a number of conservative economists have been urging a radical revamping of the program...

...and provide indexing of earnings records for the purposes of deferred survivor benefits by wages instead of prices...

...Actuaries estimate that the average cost of benefits for the 75 years is likely to be 14.09 per cent of taxable payrolls, and that tax rates will yield 12.27 per cent...

...For many years they have opposed a "merger" of the Social Security and Civil Service Retirement funds...

...And to the extent that a reduced deficit assists in keeping down inflationary price increases, it would be a helpful contribution to the income security of senior citizens...

...Thus the National Commission on Social Security Reform, with five members appointed by the President—including the chairman, economic adviser Alan Greenspan—and five each by the GOP and Democratic leaderships in Congress...

...4. Extending coverage...

...and Senate Majority Leader Howard Baker (R.-Tenn...

...At the same time, to minimize interfund borrowing, provision would be made for internal technical reallocation of the tax rates between the Old Age and Survivors Account and the Disability Account...

...In recent years the morale of the employees has been undermined and services have deteriorated...

...As a condition for finally going along with the cola delay, Pepper was able to obtain the elimination of a proposal to reduce the benefit for persons retiring at age 62 below the 80 per cent in existing law...

...An important contribution of the Commission was its unanimous recommendation that Congress should not alter the essential structure of the system or undermine its fundamental principles...

...If it did not exist, some 15 million additional Americans would be below the poverty line...

...both conditions would be improved by restoration of the board...

...The majority report dropped every one of the statutory benefit changes put forward by President Reagan in May 1981...

...As matters stand, besides extending the system to new Federal civil servants, the agreement would do away with the so-called "windfall" of Federal retirees who go on to jobs having Social Security by not permitting benefits for the time when they weren't covered...

...The three provisions, accounting for about two-thirds of the sum to be raised by the entire Commission package, have drawn the most fire from several powerfully organized groups and some influential Republicans...

...Three conservatives dissented: Presidential appointee Joe Waggonner, Senator William Armstrong (R.-Col...

...The plan does bring 1.22 per cent of taxable payroll yield to the system, though, or roughly 68 per cent of the projected needed amount...

...To eliminate certain existing gender discriminations, the new law, at an additional cost of about $500 million during 1983-89, would: permit a divorced spouse to receive benefits regardless of whether the insured former spouse has retired...

...The administration of Social Security should be taken out of partisan politics...

...R.-N...

...In recent years, many Americans have lost confidence in the promises of government as a result of Watergate, (he Vietnam War, and the country's economic instability...

...oil and gas taxes...

...Social Security had become a major campaign issue, as it was in 1936 and 1964...

...No merger of that kind is in the agreement, nor is any reduction in the pension of a retired or current Federal employee stipulated...

...This would yield $18 billion...

...One reason for this was that during the 19 months between the announcements of the President's ill-conceived suggested cutbacks and the Commission's program Congressional elections had added 27 Democrats to the House of Representatives...

...The Report of the Commission, consensus notwithstanding, includes 11 supplementary statements...

...In addition, they receive "life insurance" with respect to the death of a breadwinner who leaves a spouse and young children, and "insurance" in the event of severe disability and Medicare expenses...

...Ten of those victories were attributed by Republican strategists to the special emphasis that the Democrats, led by Florida's indefatigable 82-year-old Representative Claude Pepper, placed on the proposed benefit reductions...

...But just as Alf Landonin 1936 and Barry Gold water in 1964 were haunted by their criticisms of and alternatives to the system, Reagan, who once recommended that Social Security be voluntary, is bound to be confronted with his overall record on the issue...

...7. Equitable treatment...

...The system would receive advance credit from the Treasury for the present value of future benefits attributed to military service before 1957, when Armed Forces personnel did not pay Social Security tax, plus other credit adjustment relating to the period 1957-82...

...This is a monumental step toward eliminating the fears of many beneficiaries and contributors that the system would somehow be changed in a way that would adversely affect them...

...Kirk-land, Ball, and Martha Keys—favored an additional 0.46 per cent tax on employers and employees beginning in 2015 to continue the payment of promised benefits at 65...

...The Reagan Administration, and the Commission's business and insurance representatives made it the sinequa non of an agreement...

...2. A six-months delay in the cost-of-living adjustment (cola) from July 1983 to January 1984...

...urged moving the retirement age to 66 by adding a month per year shortly after the turn of the century, with full effectiveness to be achieved in 2015...

...And the opposition in Congress to important parts of the agreement is being led by two of the Commission's conservative dissenters: Senator Armstrong, who is Chairman of the Social Security Subcommittee of the Senate Finance Committee, and Representative Archer, the ranking minority member of the House Subcommittee on Social Security of the Ways and Means Committee...

...Although Social Security is basically aimed at preventing poverty, it also helps millions of low-income individuals...

...an end to the very modest burial allotment for most recipients...

...Social Security is a family protection plan that has an intergenerational aspect which protects children, widows, the badly disabled, and the aged, and it helps to meet medical costs for the aged and disabled...

...continue to pay benefits to widows and widowers who were divorced spouses, and to disabled spouses, after remarriage...

...Of these the three promising the greatest revenue impact are the following: 1. A rescheduling of the Social Security tax rates in the existing law...

...The President has said that he did not have "any intention of taking away the checks that these people are getting," and declared that "lies have been told by those who want to portray us as somehow out to destroy Social Security...

...I would argue that the whole subject has at the minimum been brought up prematurely, and may be irrelevant if productivity increases and the economy improves, as seems both reasonable and necessary, by the year 2010...

...The only reduction in expected disbursements would be the six-month postponement of the cost-of-living adjustment...

...or put of f the automatic indexing of income tax brackets scheduled for 1985 ($30 billion a year starting in '86...

...On the other side, despite the approval of Claude Pepper, who has devoted himself to protecting the interests of senior citizens, the 14-million member American Association of Retired Persons (AARP) has strongly objected to the Commission's three key revenue provisions: stepping up payroll taxes, taxing part of benefits, and delaying the cola...

...It similarly opposed transforming Social Security into some kind of national pension plan, or restricting benefits to those with income or resources below a stated level...

...Further, state and local governments now in the system would be prohibited from withdrawing once the legislation currently before Congress is enacted...

...it is simply a "fail-safe" device to avoid the kind of situation that occurred in recent years because high unemployment, high inflation and reduced earnings adversely affected the system...

...8. Delayed retirement...

...or tax employer-paid health insurance premiums...

...The program pays 36 million Americans benefits every month, while 115 million citizens contribute to it—and these are realities a politician must take into account...

...Of the seven other principal proposals, three round out the "savings," two concern benefit improvements, and two essentially involve more effective money management...

...To help make up the difference, a slim majority of the Commission—eight members: Archer, Armstrong, Beck, Representative Barber Conable Jr...

...But whatever the criticisms of the Commission's plan, I think its overriding virtue is that it offers the framework for restoring the faith of current and future contributors and beneficiaries inCongress'commitment topreserving the financial soundness of the Social Security system...

...The protests were immediate, and they upset political leaders of all shades, none of whom had been consulted...

...Beginning January 1984, all newly-hired Federal employees and all employees of nonprofit organizations not covered at present would come under Social Security...

...3. Inclusion of part of Social Security benefits in the Federal income tax of higher earning persons...

...The resistance to Social Security from this quarter might be sharply reduced if specific steps were taken to make it a complement to Federal employee retirement plans, just as it is in the case of private industry pension plans...

...The yield here would be $18 billion, too...

...President Reagan quickly backtracked: He agreed to withdraw the 12 proposals and establish a bipartisan blue-ribbon body that would recommend way s to handle the system's financial problems...

...Those who receive both Supplementary Security Income payments and Social Security benefits would have $50 of the latter disregarded in the figuring of their welfare entitlement, rather than the present $20...

...In the process, the system would gain $40 billion...

...Y.), Senator Robert Dole (R.-Kan...

...eventual termination of benefits to the children (ages 18-21) of retired, disabled or deceased insured individuals attending colleges and universities...

...Implementation of the bipartisan agreement should help to assure citizens that promised Social Security benefits will be there when they retire, become disabled, or die...

...Federal employee groups, meanwhile, especially the postal unions, continue to fight coverage by the system...

...Even the New York Times has suggested that once Congress disposes of the immediate problems, it should ask for another broad based commission to deal with the long-range situation—a sensible course when we have 25 years to grapple with what may not occur quite the way today's pessimists predict...

...Borrowing...

...They were fashioned in the course of protracted consideration of many alternatives and constitute a consensus supported by such members of the body as AFL-CIO President Lane Kirkland, National Association of Manufacturers' President Alexander Trowbridge, Prudential Insurance Company Chairman Robert Beck, and Robert M. Ball, former Commissioner of Social Security in the Kennedy-Johnson Administrations...

...In all, the majority agreement consists of 22 different proposals...