Social security reform is a tinderbox political issue, ready to burst into flame at the slightest spark. * In May, Health and Human Services Secretary Richard Schweiker, before a packed press conference, outlined the Reagan administration's plan to keep social security solvent for the next 75 years. He began with confidence. It was all so simple, on paper: Postpone a cost-of-living increase three months. Cut the checks of those who choose early retirement. Change the formula used to figure benefits for future retirees.
The questions came quick and sharp. Isn't this unfair to those on the verge of retirement? Aren't you cutting future benefits? (A grim-faced Schweiker aide nodded ''yes.'') In the back, lined up like a firing squad, the TV cameras caught it all for America. Mr. Schweiker began to unravel. ''Listen,'' he said angrily, ''the trust fund is going broke next year.'' He shook his notes like a fist at the crowd.
The plan was sent to Capitol Hill. It was never heard from again.
* Even after the proposal was withdrawn, the questions poured in. Secretaries took reporters aside. Would their husbands be able to retire at 62? Grandmothers called. Would next month's check come?
The Republicans had played with matches and gotten burned. The Democrats were delighted. They decided to turn their backs and let the GOP handle this pressing issue. Legislative efforts at social security reform shut down like a stalled conveyor belt.
Whatever happened to fixing up social security? A congressional aide listens. A deep, Southern chuckle rumbles across the phone line. ''That's not a quick and easy question, is it?'' he replies.
Fifty-four percent of respondents to a recent Harris survey ''have hardly any confidence'' that social security will ever pay them a dime. Unless something is done to improve the structure of the system, they may be right.
The short-term problem is OASI, the Old-Age and Survivors Insurance Trust Fund. The largest of the system's three funds, it could go broke as early as next fall.
OASI has been battered by the punches of a poor economy, which constricts the inflow of payroll taxes. At the same time, benefits have raced ahead over the past decade. Since 1975, the fund has been running in the red, shrinking its cash stockpile by $15 billion. Last year, it paid out $107.7 billion but took in only $105.8 billion. There is now only $22.8 billion left in the fund.
Unless action is taken, the cash flow crunch won't go away until 1985, when scheduled tax increases take effect.
It is likely the problem will be eased by a financial shell game, in which money from the two other trust funds - Disability Insurance (DI) and Hospital Insurance (HI) - are siphoned off to help their troubled cohort. A quick-fix-up bill now in congressional conference would authorize this action. This money switch would keep OASI afloat at least through 1984, and possibly through 1990, if the economy rebounds strongly; but it is, at best, a temporary solution.
''This is only a stopgap measure that would not solve the problem,'' says Sen. William L. Armstrong (R) of Colorado, chairman of the Senate subcommittee on social security. ''If anything, interfund borrowing is a cop-out.''
In addition, the bill would restore the $122 minimum benefit eliminated in the August budget reconciliation. Currently, squabbling between the House and Senate chambers over the final form of this restoration has held up final action.
The long-term problem for social security, looming in the background like a storm front over the Rockies, is simple one: About the year 2010, when the baby-boom generation starts to retire, a shrinking number of workers will be supporting a growing number of retirees. Fewer people will be paying for promised pensions, estimated to total over $2.5 trillion. The ratio of workers to beneficiaries will decline from today's 3 to 1, becoming less than 2 to 1. In 1950, the ratio was 16.5 to 1.
All three funds will dive into the red. No one really knows how the social security system would react to the strain.
Some think it would weather the storm very well.
''The problems with social security are not as bad as some people believe,'' says Dr. Barbara Bergman, an economics professor at the University of Maryland.
Dr. Bergman believes talk about bankruptcy is an attempt to scare people into accepting cuts in the system. Essentially, she says, social security is not a system but a commitment to America's retirees. Congress can finance this commitment any way it wants - by dipping into general revenues, for example. The system's health is determined not by the soundness of a particular financing method, but by the American people's willingness to stand behind the promise made their elders.
''We have the resources to stand behind that system,'' Dr. Bergman says. ''If you ask the question 'Can we afford to spend 7 percent of our GNP on saving old people?,' the answer is 'yes.' ''
The other side of that fence is the view that the benefits themselves, not the way of financing them, should be flexible.
''Currently scheduled benefits should no longer be considered sacrosanct,'' writes Mickey Levy in a recent American Enterprise Institute special analysis.
Mr. Levy believes the government should think more about what it can afford to pay for social security, leavening goals of social and individual equity with concern about the burden being placed on the economy as a whole. By 1986, he points out, OASI benefits alone will exceed 23 percent of total federal outlays.
''Trimming benefits would be consistent with other budget-cutting measures pending in Congress and would represent a responsible step toward ensuring the program's long-run financial soundness,'' Levy writes.
But the mere mention of trimming benefits, current or future, can light a politically dangerous fire. Congress has long sought a more palatable way of shoring up the system.
They thought the problem was licked four years ago, when amendments to the Social Security Act raised taxes and revised benefits. (We ''have assured the financial soundness of the social security program for the next 50 years,'' said the acting social security commissioner at the time.) Since then, as the system began to creak, various repairs have been mentioned.
Raising the retirement age. The cutoff point for receiving full benefits has been 65 since the program began in 1935. As a congressional report points out, ''the origin of the choice of this age is not entirely clear.'' Early-retirement provisions were added for women in 1956, and for men in 1961, but ''65'' has become a totemic number, symbolizing retirement for many people.
One way to shore up social security would be to raise the retirement age - a politically dangerous act, as Secretary Schweiker discovered. Yet a gradual increase to 68 by the year 2023 could reduce the need for future payroll tax increases by 30 percent, estimates a report of the advisory council on social security.
Adjusting the cost-of-living increase. Currently, social security benefits rise along with the consumer price index, a linkage many experts believe overstates the actual effect of inflation. The National Commission on Social Security has said the system wouldn't be in its current mess if a more accurate index had been used.
''If for some reason Congress proves unwilling or unable to legislate a sensible indexing scheme for social security benefits, then we can have little hope for the long-term financial integrity of the system,'' writes Robert Kaplan , a dean at Carnegie-Mellon University.
Change the financing. Interfund borrowing is one way of changing how the system is financed. Opponents, such as Senator Armstrong, call this a cosmetic move.
Another way of fixing the financing would be to simply raise payroll taxes. The administration, for obvious reasons, is not enthusiastic about this approach , though several proposals have lately been floated in Congress - notably, an attempt by Sen. John Danforth (R) of Missouri to tack an extra 10-cent tax on cigarettes.
Change the formula used for figuring benefits. Each retiree's monthly benefit check is figured as a percentage of the salary he received when working. The amount you get back is higher if you paid in more - sort of like income tax tables, in reverse. This benefit level is determined by ''bend points,'' which are dollar figures that act much like tax brackets. Currently, ''bend points'' are 100 percent indexed to inflation. By cutting this linkage to 50 percent for five years (as the administration proposed in May), the future cost of social security would decline about 10 percent.
A technical change, difficult to understand; but, for those now paying into the system, a reduction in promised benefits.
Eliminate ''double-dippers.'' Many experts have proposed eliminating beneficiaries who worked just long enough to qualify for social security, yet have other sizable pensions from noncovered jobs. ''Double-dippers'' are often retired government workers.
The requirements for social security disability payments could also be tightened. Trust fund investment policies could be scrutinized. The minimum benefit - which appears to have survived this year's attempt on its life - could be axed, saving $800 million a year.
Rep. J. J. Pickle (D) of Texas, chairman of the House social security subcommittee, was working on a bill earlier this year that would have gradually raised the retirement age to 68 by the year 2000. The bill would also have shuffled some general revenues into the social security cash pile.
House Speaker Thomas P. O'Neill Jr. (R) of Massachusetts decided to throw the political hot potato of long-range reform into the Republican-dominated Senate's lap. Despite some last-minute attempts at compromise, Mr. Pickle's bill has stopped moving forward.
And with it, ''the last chance for really long-range reform died,'' a congressional aide says.
The Senate didn't like holding the hot issue any better than the House did. It said it would wait for the White House.
In September, when announcing the second round of budget cuts, President Reagan called for a bipartisan task force to study social security's problems. The task force deadline would be January 1983 - conveniently after the 1982 congressional elections.
''The commission is not going to do anything,'' says a Democratic congressional staff member.