Social Security Lifeline

With the end of the Cold War and the advent of balanced budgets, the fiscal uncertainty of the Social Security program has become America’s most nagging long-term problem. It looms ever larger as the baby boom generation ages, creating a drain on benefits that will exhaust the trust fund by 2032 unless the program is fixed. At that point, Social Security would be collecting only 72 cents for every dollar it is supposed to pay out.

President Clinton’s “framework” for saving Social Security, unveiled Tuesday night in his State of the Union address, provides an encouraging foundation for a rescue plan. Much more work needs to be done by both the administration and the Congress to produce a program that is fiscally sound and considers the comprehensive needs of the system; any revision must include a look at assumptions about payroll deductions and retirement age. Now clearly is the time for reform. So long as the economy remains strong and there are budget surpluses, the bulk of that extra money should be devoted to bolstering Social Security as Clinton has proposed. Republicans are willing to debate Social Security, but their priority is a 10% across-the-board cut in income tax rates. Yet there is no public outcry for such a tax cut. Social Security must be the priority.

Clinton proposed that 62% of the budget surpluses over the next 15 years be devoted to bolstering Social Security, a total estimated at $2.7 trillion. This would keep the program solvent through the year 2055. The ultimate goal is to extend solvency to the year 2075.

The most controversial part of the plan is a proposal to divert as much as 25% of the surplus into private investments to increase the return. Federal Reserve Board Chairman Alan Greenspan expressed concern Wednesday about possible political influence on the workings of the equity market. His reservation will properly prompt Congress to scrutinize the specifics of Clinton’s proposal.

Rounding out the Clinton plan are proposals that 15% of the surplus go to assure the solvency of the Medicare trust fund and that 11% be set aside for a new retirement savings account program that would be similar to 401(k) savings plans. These elements help make the Clinton proposal a comprehensive reform. But much remains to be worked out, including a possible contingency plan in case the surpluses suddenly dry up. Nevertheless, the framework is a major step toward a long-range solution for Social Security.

If ever the president and Congress needed to toil in a spirit of civility and bipartisanship, the time is now and the subject is Social Security. Generations of Americans will be grateful.