New US warning on social security
The moment when Congress must act to fix the financially troubled social security system keeps creeping closer and closer.
In its annual report released April 1, the Social Security Board of Trustees issues a dour warning: due to a weak economy, the short-term stability of the social security program is ''significantly worse than was estimated last year.'' Unless current law is changed, says the report, the Old-Age and Survivors fund (OASI) -- largest of the system's three trust funds -- will be drained dry by July 1983.
Potential long-range problems for social security, while remaining potentially severe, haven't gotten any worse, says the board, made up of the secretaries of labor, Treasury, and health and human services.
The news about OASI shouldn't be interpreted by pensioners as a dramatic new turn for the worse.
''It's not shocking,'' says Dr. Merton Bernstein, law professor at Washington University and chief consultant to President Reagan's National Commission on Social Security Reform. ''I don't think that prognostication is especially new.''
Still, it should give Congress a shove toward taking up the politically unpalatable task of shoring up the giant retirement system.
''That still does allow us time to do something,'' says an aide to Sen. William L. Armstrong (R) of Colorado, chairman of the social security subcommittee. ''There are tangible things we can do that won't kill us now.''
Last year, the trustees warned that OASI would run out by the end of 1982 unless something was done. Congress opted for the quick and dirty method of solving the problem, passing stopgap legislation that allowed OASI to borrow from the two other, more robust trust funds.
Interfund borrowing expires at the end of this year. Renewal would be a fragile prop for the shaky system.
''Interfund borrowing, even if it could be extended past 1982, would provide at best a narrow margin of safety rather than a satisfactory answer to the short-range financing problem,'' say the Trustees.
Senator Armstrong has suggested easing the cash flow crunch by slowing down July's scheduled cost-of-living increases, a move mentioned gingerly by many Congressmen as a way of making a dent in huge projected budget deficits. The administration has previously estimated that a three-month postponement would save $6 billion over the next five years.
Another move, mentioned by both Armstrong and Rep. J.J. Pickle (D) of Texas, House social security subcommittee chairman, is gradually pushing back the retirement age from 65 to 68. A commission appointed by President Carter estimated such a move would, in effect, double the number of people paying in to the system per recipient.
Robert M. Ball, former social security commissioner, argues that simply allowing OASI to borrow from general tax revenues would stop the short-term crumbling.
''Between 1990 and 2015 there'll be a huge surplus in the (social security) cash benefit system,'' says Dr. Bernstein, citing scheduled tax increases and changing demographics. ''Any borrowing from general revenue could be paid back out of this surplus, with interest.''
Changing the formula used to figure benefits could also slow outflows. ''Bend points'' -- dollar figures that act much like tax brackets -- are now indexed to inflation. Reducing the linkage to 50 percent of inflation could save about 10 percent on the future cost of social security, but would be a reduction in promised benefits for those now paying into the system.
The long-range problem looming in the background is a 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. All three funds will dive into the red. No one really knows how the system would weather the strain.
President Reagan established his National Commission on Social Security last December, to recommend solutions for both short and long-range troubles. Their report is due this Dec. 31.