November 9, 1977

Social Security Can't Get There From Here

There is good news and bad news about Social Security.

The good news is that Congress is going to save the ailing retirement system from immediate bankruptcy.

The bad news is that the remedy may kill the patient.

This year Social Security will pay out $5.6 billion more benefits than it will take in as taxes, a short-fall that has been going on for years.  At this rate the disability fund would be gone in two more years, and the retirement fund in five.

Congress has launched a rescue operation at long last.  Unfortunately the House and Senate seem disposed to paste on a Band-Aid rather than to undertake definitive surgery.

But let us not criticize too strenuously.  It has been "only" 11 years since the late Congressman Frank Bow of Canton, ranking Republican on the House Appropriations Committee, first tried to warn his colleagues of impending Social Security deficits and urged me to write a column about it.

At this writing, both the House and Senate have passed far-reaching bills to revamp Social Security.  A joint conference committee is now trying to resolve differences.

The House bill would preserve equal funding by employees and employers and triple the tax rate.  The Senate version would double the rate on employees and increase it five-fold on employers.

It is probable that many of the radical provisions in both measures will die quiet and unmourned deaths in committee.  However, two big changes are likely to remain: (1) Borrowing from the general (income tax) fund, and (2) Placing a larger share of costs on employers.

Each bill would produce about $285 billion during the coming "critical" decade.  The House proposes to obtain about half of this from the general government fund.  The Senate, soak-employer plan would require less income tax support.

Both big changes seem to be inevitable under the present, emotional climate.  Americans are not yet prepared to accept cuts in benefits.

How money can be funneled from the general fund into Social Security is a mystery.  There is no money in the general fund inasmuch as it, too, operates continuously in the red.

Presumably the money will be made available by curtailing some other national service, but what?  Welfare?  Defense?  Education?  Or, perhaps, new taxes will be levied, but where?  Oil?  Imports?  Cars?

Once the door to the general fund is opened to Social Security we can expect the retirement system to become the ultimate welfare program.  We are in the financial difficulties we are today because vote-hungry Congressmen dish out free lunches in return for re-election.

Democrats contend the Social Security fund will experience a "manageable deficit" of only 2 percent per year over the next 75 years.  Future Congresses, they say, will meet each future crisis as it arrives!

Republicans point out that the accumulated deficit over this period will amount to $800 billion, more than today's entire national debt.  Furthermore, the "unfunded deficit" - the cost of promises over and above estimated taxes, plus interest - will be $4.1 trillion.  This is twice as much as the total annual worth of all U.S. goods and services (gross national product)!

Obviously we can't get there from here!  Juanita Kreps, secretary of commerce, blurted out the solution in a press conference a few weeks ago - cut benefits.  Her principal suggestion was postponement of retirement to age 68 instead of 65.  Social Security could be brought back into balance simply by holding oldsters in the contributing work force just three more years while their accelerated death rate reduces the ranks of claimants.

For committing truth, Ms.  Kreps was banished to Limbo and hasn't been heard from since.

Republicans in Congress have suggested a less drastic program of Social Security reform but can't get it past the overwhelming majority.  Essentially the GOP plan calls for moderate tax hikes and elimination of the abuses that brought Social Security to its sorry state.

One thing that has to go, sooner or later, is "double indexing" whereby Social Security payments are increased automatically as the average wage and the consumer price list each goes up.  After 10 years, retirees draw more from social security then they made while working.

"Double dipping" is another Social Security rip-off that has to be stopped.  This is a common practice of public employees earning a government pension in 20 years then working 10 more years in private business to qualify for a second, Social Security pension.

Some 5 million public employees are guaranteed their pensions by government and do not contribute to Social Security.  They steadfastly refuse to join the risky Social Security System, yet - drain its resources from those commanded to join.

Placing a large share of Social Security costs on employers is certain to further depress an already sagging economy.  Labor-intensive businesses will be caught in the vise of soaring labor costs and cheap foreign competition.  Efforts will accelerate to replace workers with labor-saving machinery, thus swelling the ranks of the unemployed.

Some time soon, if not now, we have to face the realities of Social Security capability.  It never can deliver what we now expect.  To stubbornly demand it will kill the system.  Better half a loaf than none.

Author: Lindsey Williams