Social security: growing number of elderly draw funds from drying well

It startled many politicians in Washington. When the Senate last week abruptly rejected by 96 to 0 President Reagan's proposal to cut social security benefits for people retiring before age 65, it was like a thunderclap. It suddenly revealed one of the largest political constituencies in the nation -- the elderly, building up entitlements in America's retirement funds to which practically all working Americans contribute.

Some are at the point of receiving benefits, some get monthly green checks in their mail boxes already. And the proportion of the latter will increase in years ahead.

There are two essential elements that control the situation:

* The huge social security system will go broke in a year, actuaries believe, if something isn't done.

* A startled Reagan administration is willing, even eager, to work out a compromise with Congress.

Now all sides are regrouping. Signs indicate that the administration didn't realize the sensitivity of the problem nor did Washington appreciate the country's knee-jerk reaction that followed the hint that retirement pay was being reduced.

Secretary Richard S. Schweiker of the Health and Human Services Department protests that the administration is not wedded to any single solution, and particularly the proposed penalties for early retirement, which Sen. Edward M. Kennedy (D) of Massachusetts calls "hasty, ill-advised, and devastatingly punitive."

House leaders working on social security will be back in Washington this week to take up the negotiating process with Reagan on a compromise formula, Mr. Schweicker said. "An awful lot of political sharpshooting has been going on," he complained.It would be better to decide the complex matter now --"the hardest problem in my experience for 20 years" -- than to wait till the midterm election next year when it might be impossible. He urged bipartisanship; the administration "is open to reason," he said.

President Reagan has sent letters to congressional leaders asking help to work out "sound, sensible solutions" in a serious situation. The social security system, he declared, "is teetering on the edge of bankruptcy." Something must be done. He asked nonpartisan support on "alternative answers." Behind this, the administration is aware that its whole anti-inflation package may get involved in a battle over one of its constituent parts, the social security pay-out problem.

High unemployment has reduced the numbers of workers paying into the system. Meanwhile, inflation has hiked payment levels to retirees, who receive cost-of-living adjustments. The system is divided into three parts: Old Age and Survivors Insurance (OASI), Hospital Insurance (HI), and Disability Insurance (DI). It is only the first that is in trouble: The other two have surpluses. But OASI cannot borrow from the others, nor is it supported by general Treasury funds.

Demographically, one problem is that America's population is getting older and that the ratio between the number of workers who are paying into the system and of older retirees who are benefiting from it is widening. A new Census Bureau report May 23 says there are 28 percent more Americans over 65 (25.5 million) than there were in 1970.

A more mature population alters the statistical basis on which social security support and expenditure is based. In the decade ending 1980, the number of children under 15 dropped from 58 million to 51 million; the median age of the nation (the age at which half the population is younger and half is older) rose from 28 to 30. And it's just begun, says the Census Bureau: Based on demographic trends the median age will be 36 by 2000, 38 by 2010. Back in 1945, 42 workers paid into the system for each retiree. In 1977 the ratio of workers to beneficiaries had shrunk dramatically: It is now around 3.2 to 1. But the gap continues to narrow, particul arly in times of economic slump.

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