...Youths Demand the Walk

WITH reports that a federal advisory panel appointed by President Clinton is joining the chorus of those calling for Social Security reform, it appears that our nation's financially threatened retirement system might finally be heading for change. But what type of change that will be is far from clear. Will it actually address the long-term solvency of a program that many younger Americans are rightly concerned won't provide them with benefits when they retire?

The proposals coming out of the president's advisory panel, the latest in a series to emerge over the last several years, are encouraging. But they place undue emphasis on a number of less-concrete (though politically benign) measures. The most important are investing Social Security money in the stock market rather than in government bonds, and the increasingly popular idea of allowing workers to place a portion of their payroll taxes in private investment accounts.

While no doubt alluring to financial-services companies eager to get in on what could become a huge new market, these changes effectively skirt those well-known, yet politically perilous, steps that are indispensible to restoring Social Security to genuine long-term health.

Such steps, versions of which were articulated last year in the Senate's bipartisan Kerrey-Simpson bill, are neither subtle nor painless. They include: raising the retirement age; cutting (yes, that is the appropriate word) benefits for wealthier retirees - known as "means-testing" or "affluence-testing" - and reducing yearly cost-of-living adjustments.

There's nothing new or particularly complex about these changes. But politicians of all stripes find them hard to swallow, especially in an election year; not surprisingly, none has yet been implemented.

Raising the retirement age is most important. Sens. Bob Kerrey (D) of Nebraska and Alan Simpson (R) of Wyoming have suggested gradually raising the age of full eligibility from 67 to 70. And while they certainly deserve praise for being among the first to voice this controversial approach, they don't go nearly far enough: Under their plan, for example, the retirement age wouldn't hit 70 until the year 2030 - ironically, just around the time that older members of today's younger generation turn 65. Think of how much more could be saved by raising the retirement age immediately - but don't hold your breath, because in today's political climate this doesn't appear likely to happen.

Cutting benefits for wealthier retirees, another integral part of meaningful reform, is probably the most politically palatable of any of these changes. However, considering that half of Social Security recipients currently subsist on household incomes of less than $25,000 a year, experts will quickly tell you that there are limits to how much can be saved in this fashion.

The most talked-about move, of course, is cutting cost-of-living increases. Calls for a reduction have been heard not only from Senators Simpson and Kerrey but, more recently, from Sen. Daniel Patrick Moynihan (D) of New York and President Clinton. They argue that the Consumer Price Index, which is used to determine the size of the yearly adjustments received by America's 37 million retirees, currently overstates inflation. Unlike Simpson and Kerrey, however, what the president and Senator Moynihan have in mind is to use the billions in savings resulting from such cuts to balance the budget rather than to shore up a financially imperiled Social Security trust fund - a move that, not surprisingly, hasn't gained much popularity among young Americans who have grown tired of empty rhetoric when it comes to entitlement reform.

The president's advisory panel, with the recommendations it is expected to make, can only add to the debate. Its two central themes - investing Social Security funds in the stock market and the creation of private savings accounts - might very well improve the system. But the changes outlined above, which are sure to be only more bitter down the road if delayed, are the ones that really matter. They need to be undertaken today. Anything else amounts to little more than window dressing.