Why reforming social security will ease deficit

One prime beneficiary of social security reforms now pending before Congress would be the deficit-ridden federal budget. Social security's cash shortfall - about $17,000 a minute, according to Commissioner John Svahn - increases the federal deficit. Shoring up the system's finances would thus help stem Uncle Sam's flow of red ink.

The package of retirement system repairs produced last week by the National Commission on Social Security Reform would close the deficit gap by an estimated President Reagan's coming '84 budget, according to White House spokesman Larry Speakes.

Administration officials are still figuring the short-term savings. ''It hasn't been worked out yet on a year-by-year basis,'' says Ed Dale, a spokesman for the Office of Management and Budget.

But estimates compiled from commission data show savings of $3 billion to $4. 5 billion in 1983 - mostly from the proposed three-month delay in granting beneficiaries a cost-of-living increase.

The '84 deficit would probably be slashed even more, about $12 billion, as revenue from new taxes came rolling in. That would help bring the projected '84 deficit down into the range of $180 billion to $190 billion. That figure would dip somewhat in '85, due to a one-shot income-tax credit proposed by the package , and then rise to about $14 billion in '86. The tax credit is designed to offset the proposed 1984 social security tax increase, but it's difficult to determine exactly when its effects will show up, Mr. Dale explains.

Of course, all savings figures are just so much number-juggling unless Congress actually enacts the commission's proposals. In 1981, the administration's midyear deficit prediction figured $3 billion in savings from a package of social security reforms proposed by the White House that quickly fizzled on Capitol Hill.

In the fight to keep the projected '84 deficit in the merely astronomical range, President Reagan is now reportedly considering cribbing an idea from the commission's social security proposals and broadening the six-month freeze on cost-of-living adjustments (COLA). Applying such a freeze to civil service pensions, veteran's retirement benefits, and other government programs could save several billion dollars.

Ironically, the declining rate of inflation makes such a freeze a far less effective deficit-reduction tool.

''They're freezing (the social security COLA) at a time when it will probably be one of the smallest COLAs ever, anyway,'' notes Gene Kimmelman, staff attorney at the citizen's group Congress Watch.

While the national commission's proposed social security repairs would help ease the budget crunch of the next seven years, they leave a potentially larger problem unaddressed: what to do after the year 2010, when an increasing number of elderly will send social security, and perhaps the federal budget, deeply into the red.

In the commission's final report, due later this week, the panel's five Democrats will recommend a tax increase after the turn of the century to close the long-term funding gap. Commission Republicans will address the same problem by suggesting a gradual increase in the retirement age.

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK